What is a W-4 Form?

The W-4 Form is the IRS document you complete for your employer to determine how much should be withheld from your paycheck for federal income taxes and sent to the IRS. Accurately completing your W-4 will help you avoid overpaying your taxes throughout the year or owing a large balance at tax time.

Usually, the first day of a new job is when many taxpayers complete a W-4 tax form and ask themselves “what is a w-4 form?” If this is you, you’re not alone. Many people don’t really understand the definition of a W-4 form or how it affects your taxes. Maybe you take a guess at how to fill it out, or maybe a friend has advice. But it’s important to look to the right sources when it comes to tax information. Don’t worry — we’ve got your back. Read on to better understand the nuances of this important tax form!

W-4 definition in further detail

Failing to take the time to understand the W-4 explained in plain terms could lead to confusion. A W-4 is the IRS document that you complete for your employer to determine how much should be withheld from your paycheck for federal income taxes. Accurately completing your W-4 can help you avoid overpaying your taxes throughout the year, or even owing a large balance at tax time.

The W-4 explained…Top questions to consider

Here are some common W-4 questions explained…

“What if I start a new job?”

As mentioned above, when you start a job, it’s important to revisit your Form W-4. It doesn’t change the amount of your pay that will go toward Social Security and Medicare. Those are defined amounts.

If you don’t fill out a new W-4, you employer will definitely still give you a paycheck. But they’ll also withhold income taxes at the highest rate for single filers, with no other adjustments.

“How is the amount withheld determined?”

The W-4 is used by your employer to determine how much income tax to withhold based on your marital status and any other adjustments you decide to include on the form.

“What are withholding adjustments?”

The new W-4 that came out in 2020 removed withholding allowances. In fact, concepts and questions such as dependency allowances, number of exemptions and “how many exemptions should I claim?” have all gone by the wayside.

The good news is that there are still ways to adjust your tax withholding on your tax return even if withholding allowances and claiming exemptions as a concept no longer exist. In fact, there are resources to help you answer any lingering questions before filling out your W-4 form. One particular resource worth trying is the W-4 paycheck tax calculator. Just plug in your information and it will help figure out which withholdings work best for you.

“Can I Claim 0 Allowances to Get a Bigger Tax Refund? How can I do this on the new W-4?”

On the new W-4, the nearest equivalent of claiming zero allowances this: filling out your w-4 and completing Steps 1 and 5 on the form and nothing else. These steps are simply the personal information section and signing the form at the bottom. This will allow your employer to withhold based on your filing status, the tax rates, and no other adjustments.

One caveat: make sure to have enough withheld. If you don’t withhold enough taxes, you may have a larger federal tax bill once you file your return.

“Should I re-check my W-4 after I get married?”

It’s best to revise your Form W-4 after major life events such as getting a new job, getting married, or having your number of dependents change – like when a baby is born or adopted or when your adult child is no longer considered a dependent.

“Should I declare myself exempt from withholding?”

No, it’s not a good idea to claim you’re exempt simply in order to get a bigger paycheck. By certifying you are exempt, your employer wouldn’t withhold any federal income tax amounts during the year, and that would result in a large tax bill due in April. In addition to having to pay a whole year’s worth of taxes, you could also face interest, underpayment penalties, and other consequences.

You are exempt if you meet the following criteria:

• For the prior year, you had a right to a refund of all federal income tax withheld because you had no tax liability
• For the current year, you expect a refund of all federal income tax withheld because you expect to have no tax liability

Unfortunately, most people don’t meet these criteria, but if you do, then by all means claim exempt from withholding on your W-4 form.

Did you know… being exempt is different than an exemption? Learn more in our post, “What is a tax exemption?”

“What if I haven’t withheld enough?”

This is the good part – you can complete a new W-4 at any time to change the amount of withholding you claim going forward. If it’s far into the tax year, you may want to have a set amount withheld from your remaining paychecks. This will help compensate for amounts that would have been withheld earlier in the year. While it could decrease of your monthly income, it helps ensure you have a tax liability come tax time. (Just make sure to adjust the amount back at the beginning of the next year.)

Here is an example to clarify this: On the advice of a friend, Jamie claimed less withholding on her Form W-4 in order to increase her take-home pay. Normally, Jamie would be able to allow her employer to withholding based on her filing status and tax rate, because she is single and doesn’t have any children. However, since she has not been withholding sufficient amounts for the first half of the tax year, she might go ahead and decide to withhold a little bit more for the rest of the year to compensate. She should also consider having a set additional amount withheld. In January, she will then complete a new W-4 leaving out the additional withholding, since she has not had any major life changes.

Have we answered, “What’s a W-4?”?

So, have we properly answered, “What’s a W-4 form” and all related W-4 questions? Even with all W-4 information explained, the topic can be a bit tricky. For more guidance, consult a tax pro for more help.

Make an appointment to get additional help from an H&R Block tax professional. Or discover the other convenient ways to file with H&R Block.