For many taxpayers, the relevance of this form remains to be determined, despite its impact on their taxes. Many people need to be made aware of what the W-4 is and how it affects their finances.
What is IRS Form W-4?
IRS Form W-4, also known as the Employee’s Withholding Certificate, is a form that employees submit to their employers to instruct how much federal income tax should be withheld from their paychecks. The form plays a pivotal role in ensuring that the correct amount of tax is deducted from an employee’s earnings throughout the year. If too little tax is withheld, an employee may owe money to the IRS when filing taxes, while too much withholding could lead to a larger-than-necessary refund.
In 2024, the IRS introduced an updated version of Form W-4 as part of its regular effort to improve clarity and adjust figures related to tax credits. “The IRS updates the W-4 form annually to reflect any legislative changes or inflation adjustments, ensuring taxpayers can withhold the correct amounts,” a tax expert from the IRS noted.
Who must file a Form W-4?
Any employee who earns income in the U.S. must fill out Form W-4 when they start a new job. This form must be provided to the employer so they can determine how much federal income tax to withhold from each paycheck. While the W-4 is generally completed at the start of employment, it’s important to review and update it after important life events—such as marriage, the birth of a child, or buying a home—that may affect your tax liability.
How to fill out IRS Form W-4 in 2024
Filling out the W-4 form might seem daunting, but following the steps carefully can help you ensure that the correct amount is withheld from your paycheck. Let’s go through the form step by step.
Step 1: Personal information
The first section of the form asks for your basic details, including:
- Your full name
- Address
- Social Security Number
- Filing status (e.g., single, married filing jointly, head of household)
Your filing status affects how much tax will be withheld. For instance, single individuals typically have a higher withholding rate compared to those who are married and filing jointly.
Step 2: Multiple jobs or working spouses
If you have more than one job or file a joint return and your spouse works, follow the instructions for more accurate withholding.
- To get the W-4 for the highest-paying job, complete steps 2 through 4(b). Leave those steps blank on the W-4 forms for the other jobs.
- If you or your spouse have a total of 2 jobs and earn about the same amount at both, you can choose to check box 2(c) to say so. But you’ll have to do this on both Forms W-4.
- If you do not want to disclose to your employer that you have a second job or that you earn income from other non-employment sources, you can:
- Indicate on line 4(c) to withhold an additional amount of tax from your paycheck.
- Alternatively, don’t include the additional income on your W-4. Instead of having the tax come directly out of your paycheck, send the estimated tax payments to the IRS yourself.
Step 3: Claim dependents
This section applies to employees with dependents. If your total income is less than $200,000 (or $400,000 if married filing jointly), you can claim credits for your dependents. For each qualifying child under age 17, you can claim a $2,000 credit. Other dependents provide a $500 credit.
Even if you have dependents, you can choose not to claim them on your W-4 if you prefer more tax to be withheld, which can result in a smaller tax bill or a larger refund at the end of the year.
Step 4: Adjustments for other income and deductions
If you expect to have additional income that isn’t from a job (such as interest, dividends, or retirement income), or if you expect to claim deductions other than the standard deduction, you can use this step to adjust your withholding.
For example, if you have investment income, you might want to indicate this in Section 4(a) to avoid owing taxes later on. Additionally, you can request extra tax to be withheld by filling out Section 4(c).
Step 5: Sign and date
Once you’ve completed all relevant sections, all that’s left is to sign and date the form. Be sure to review your information for accuracy before submitting it to your employer’s payroll department.
Why is Form W-4 important?
The way you fill out Form W-4 determines whether you’ll owe money when filing your taxes or receive a refund. Incorrect or outdated information on your W-4 can lead to under-withholding, which could result in a hefty tax bill, or over-withholding, which means you’ll be giving the government an interest-free loan that will be returned as a refund.
The IRS encourages taxpayers to review their W-4 annually, especially after life events such as getting married, having children, or experiencing changes in income. “A simple review of your W-4 can make all the difference between owing and getting a refund,” according to the IRS.
