What is a W4 Tax Form?

In 2018, there was a change in the W4 where the new tax law did away with the personal exemptions which were the backbone of the old form. Beginning this year, the IRS updated the W4 so that taxpayers will find it easy to fill it out. Now, it calculates how much federal tax should be withheld based on a more thorough measure of employees’ sources of income and dependents in their household. 

In 2020, major changes were made to Form W-4, the form every employee has to fill out to determine the amount of taxes that are withheld from each paycheck. The revision by The Internal Revenue Service (IRS) aims to increase its transparency and the accuracy of the payroll withholding system.

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The W4 form may look intimidating at first glance, but you will most likely know the answers to most or all of the questions it asks. Steps 1 and Step 5 in the form are mandatory. You fill up your personal info and sign. Personal info includes name, address,  Social security number, and filing status. Filling out the form is simple if you are single, have a spouse who doesn’t work, don’t have dependents, have only one income from one job and aren’t claiming tax credit or itemized deductions. Steps 2 through 4 may not apply to everyone, but completing it will make your withholdings more accurate.  Step 2 is quite new to the W4 and is arguably the most confusing change in the form. You can complete this step if you have more than 1 job, or are married, filed jointly, and both you and your spouse work. Enter the estimate of incomes of all these jobs in a year. 

If you don’t want your employer to know that you have a second job or your other income details, you can use the IRS tax withholding estimator online and enter the dollar amount in step 4. This is to make sure that the right amount is being withheld from your pay. 

In filling up the dependents section in step 3, you are now asked to enter in dollars not the number of dependents. In most cases, the dependents are considered anyone who is under the age of 17 who lives with you for more than half the year.

For step 4, here you can make adjustments so that more taxes can be withheld in your paycheck. Step 4 has 3 parts: Fill out 4(A) if you have income that doesn’t come from a job such as dividends and or retirement income. Part 4(B) is filled out if you expect to claim beyond standard deduction and part C allows additional money from your paycheck to be withheld. 

Once you complete filling out all the information needed in the form, submit the form to the appropriate party and you can always change your W4 anytime. 

When Should You File a New W4?

In general, you may find yourself filling out a new W4 if the following applies to you:

• You get a new job
• You get married
• You get divorced
• You have children
• A child passes away