Tips and Tricks on How to Fill Out Form W-4

by Paul Tarnavsky on September 5, 2012

Tips and Tricks on How to Fill Out Form W-4

Form W-4 is typically filled out when you start a new job. The form is used by your employer to establish how much money will be withheld for federal income tax from each paycheck. Although the form is relatively simple to fill out, it can be deceptive and can land you into hot water if done incorrectly. Keep in mind that this article is intended for the vast majority of taxpayers. Click on the following link to view Form W-4

 A.  The Basics

Many folks may be too embarrassed to ask a few basic questions about withholding amounts or personal exemptions/allowances, so here are the basics. The more allowances you claim on your W-4, the more money you will receive per paycheck. The fewer allowances you claim, the less you will receive each paycheck. Each April at tax time, your 1040 tax return will determine whether too much or too little money was withheld from you paychecks throughout the year. If too much was taken out of your paychecks, you will be getting money back from the IRS (refund). If too little was taken out, you will have to pay the IRS more.

 Therefore, if you find yourself owing money to the IRS each year for several years, there’s a very good chance that you simply need to adjust your withholding number on your W-4 – problem solved!   

B.  Filling Out the W-4

Boxes 1 and 2 of the form are self-explanatory and include you name, address, and social security number. The confusion begins and ends with Boxes 3 and 5.

1. Box 3 – Tax Rate

This box will determine your tax rate. If you are married but want to be taxed at the higher single rate to ensure that that enough money is taken out for taxes, then check that box. Please note that by checking this box, your ability to file as married filing jointly on your tax return is in no way affected.

2.  Box 5 – Personal Exemptions, the Important Number

For Married Couples

If you are married with no children, and both you and your spouse are employed, you must coordinate how each of you will fill out the form. For example, if each of you place “2” personal exemptions of the W-4, then come April, your combined incomes and withholdings on your tax return will reflect a total of 4 personal exemptions even though there are only 2 of you. This will surely lead to an under-withholding from your paychecks and result in a liability to the IRS. The solution? Each of you only put the number “1” into Box 5 or one spouse use 2 while the other uses zero. Either way, the combined total exemptions (from both of your W-4’s) in Box 5 should not exceed 2.

For Those with Multiple Jobs

If you are working for more than 1 employer at the same time, you should not claim 1 exemption on each W-4 for each employer. Why? Just as above, the best way to answer this is to provide an example. If you are single, you would essentially be claiming 2 exemptions when only 1 should be claimed. The solution is to claim 1 exemption on the first W-4 and zero on the other.  

C.  Tarnavsky Tax Firm “Rule of Thumb”

How many people in your house (Include yourself, your spouse and any children you will claim as dependents)? The combined total of all exemptions taken on all W-4’s for all employers for you and your spouse should not exceed the number of people in your house. Using this method will almost guarantee that you will not owe any money come April 15th.

D.  Making Adjustments to the W-4

Feel free to make adjustments to your W-4 at any time during the year. If you owed money last year to the IRS and have yet to make any changes to your W-4 this year, it’s never too late. Contact your employer’s human resources department and simply let them know that you’d like to change your W-4. Then adjust your personal exemptions or your tax rate.

For more information on how to properly complete a W-4, contact the Tarnavsky Tax Firm, a nationwide law firm specializing in taxation.



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