The W-4 Form: Understanding Withholding Allowances
As a working adult, there are various documents and forms that come along with a job. One of the most important forms that must be filled out when starting a new job is the W-4 form. This form determines how much tax will be withheld from an employee’s paycheck. In this article, we’ll dive deeper into the W-4 form, its purpose, how to fill it out, and its updated version.
What is a W-4 Form?
The W-4 form, also known as the Employee’s Withholding Certificate, is a document that must be filled out by every employee when starting a new job. The form is used by employers to determine how much federal income tax to withhold from an employee’s paycheck. The amount of tax withheld depends on the number of allowances claimed by the employee on the form.
Purpose
The primary purpose of the W-4 form is to ensure that the correct amount of tax is withheld from an employee’s paycheck. The form is important because it helps employees to avoid owing money to the IRS at the end of the year when they file their tax returns. On the other hand, if an employee has too much tax withheld from their paychecks, they will receive a refund when they file their tax returns.
How to Fill Out a W-4 Form
Filling out a W-4 form can be a bit tricky, especially for those who are new to the workforce or have never filled one out before. Below is a step-by-step guide on how to fill out the form:
Step 1: Personal Information
The first section of the form requires you to fill in your personal information including your name, address, and Social Security Number.
Step 2: Filing Status
The second section of the form requires you to choose your filing status. There are five filing statuses to choose from: single, married filing jointly, married filing separately, head of household, or a qualifying widow(er).
Step 3: Multiple Jobs or Spouse Works
The third section of the form is for employees who have multiple jobs or their spouses work. This section helps employees to accurately calculate the amount to be withheld from their paycheck.
Step 4: Dependents
The fourth section of the form allows employees to claim their dependents. Dependents can be children, parents, or other relatives who rely on the employee for financial support.
Step 5: Other Adjustments
The fifth section of the form is for employees who want to make additional adjustments to their withholding amounts. For instance, employees can use this section to specify a particular amount to be withheld from their paycheck.
Step 6: Sign and Date
The final step is to sign and date the form and submit it to the employer.
Updates to the W-4 Form
The W-4 form underwent a significant change in 2020, which resulted in a new version of the form known as the 2020 W-4 form. The new form is much simpler and easier to fill out compared to the previous versions.
The 2020 W-4 form eliminated the use of withholding allowances, which were sometimes confusing for employees to determine how many to claim. It also made filing more streamlined and modern, with new input fields like step 2 and step 3, which allow taxpayers to better tailor the withholding thresholds to their specific situations.
The changes to the new form came after the passage of the Tax Cuts and Jobs Act in 2017, which resulted in significant changes to the tax code. The new W-4 form reflects the updated tax law and ensures that taxpayers are not significantly under or over-withholding money for taxes.
Conclusion
The W-4 form plays a crucial role in the payroll process. Employers rely on the form to determine how much tax should be withheld from an employee’s paycheck. The form has undergone significant changes in recent years, resulting in a more streamlined and modernized version. As an employee, it is important to accurately fill out the form to avoid any surprises at tax time. Remember, the W-4 form should be updated anytime there is a significant change in life circumstances, like marriage, the birth of a child, or a change in the number of personal allowances claimed.
Filling Out a W-4 Form
The W-4 Form is filled out by an employee so an employer can withhold the correct portion of federal income tax an employee’s pay. At the beginning of a new job, employees are required complete a W-4 form and give t to the employer so that the employer can calculate how much tax to withhold.
An employer needs to collect W-4 forms from the employees in order to process an employee’s payroll check. A new employee should be provided a W-4 form to fill out on their first day of employment. If a payroll preparer has not received a W-4 form from an employer, a payroll check cannot be issued to the employee.
The Internal Revenue Service requires all employers and businesses to collect W-4 forms from their employees. The information given on the W-4 form is used to calculate payroll taxes. The W-4 form includes information such as employee name, Social Security number, marital status address, and the total allowances claimed for tax withholding.
The W-4 form has five sections
· Instructions for filling out the W-4 form
· A personal allowances worksheet
· Deductions and adjustments worksheet
· Two-earners/multiple jobs worksheet
· The W-4 form
For an employee who are is exempt from any withholdings, he or she must complete personal allowance worksheet in order to adjust withholdings based on certain credits, itemized deductions, income adjustments, multiple jobs, or two-earner situations.
For an employee that exempt from withholding, he or she must only complete lines 1,2,3,4, and 7 as well as sign the W-4 form in order to validate it.
An employee is not eligible to be exempt from withholdings if:
· The employee is claimed as a dependent on another person’s tax return
· The income exceeds $950 and includes over $300 of unearned income or the gross income is more than $9,300 for a single $12,010 for a household head, $7,960 if married filing separately, or $16,750 if married filing jointly.
For a nonresident alien who is filling out the W-4 form, there are certain special instructions required.
· Regardless of marital status, a nonresident alien must check “single” single marital status
· Unless the nonresident alien is a resident of Mexico, Korea, Canada, or a U.S. national, the nonresident alien should put only one withholding allowance on line 5.
· Line 7 should not be claimed as exempt
· Line 6 of the W-4 form should have NRA or nonresident alien written.
A new W-4 form must be filed anytime an employee’s tax situation changes and the employee chooses to have more or less tax withheld.
