What Is a W-4 Form?
Employees fill out an Internal Revenue Service (IRS) W-4 form, or an Employee's Withholding Allowance Certificate, to indicate their tax situation to the employer. The W-4 form tells the employer the correct amount of tax to withhold from an employee's paycheck based on the employee's marital status, number of allowances and dependents, and other factors.
Understanding the W-4 Form
The employee fills out seven lines of the W-4 form. The first few lines include the taxpayer's name, address, and Social Security number. A worksheet included with the form lets taxpayers estimate the number of allowances on their tax withholding. Increasing the number of allowances reduces the amount of money withheld from the paycheck. A person can claim an exemption from withholding any money if they did not have a liability during the previous year and expect to have zero tax liability in the next year.
On Jan. 1, 2018, personal exemptions were suspended (not allowed) until Jan. 1, 2026, in the wake of the Tax Cuts and Jobs Act.
The worksheet starts by letting taxpayers add one allowance if they cannot be claimed as a dependent on someone else's income tax return. Employees can take another allowance if they are single and have just one job, are married with one job and the spouse doesn't work, or have wages from a second job within the family totaling less than $1,500.
On the next line of the worksheet—child tax credit—employees can claim allowances for each of their eligible children, depending on income earned and how many children they have.
- Employees fill out a W-4 form to let employers know how much tax to withhold from their paycheck based on the employee's marital status, number of exemptions and dependents, and other factors.
- Increasing the number of allowances on the form decreases the amount of money withheld from the paycheck.
- Taxpayers can file a new W-4 any time their situation changes, such as when they marry, divorce, or have a child. A change in status can result in more or less tax being withheld.
The following line—credit for other dependents—asks employees to enter allowances for other dependents that will be claimed on their tax return. IRS Publication 501 spells out who qualifies as a dependent. There are income limitations for credit in this section.
Those looking to apply other credits, such as the earned income credit, need to fill out the following line. To see if you may be entitled to additional allowances check out Worksheets 1-6 in IRS Publication 505. On the final line add up all the numbers from the previous lines and enter the total.
The employer then calculates how much to withhold from a paycheck based on the allowances calculated on W-4 form. The money withheld goes to the IRS after each paycheck.
Taxpayers can file a new W-4 at any time—and should definitely check whether they need to do so whenever their situation changes, such as when they marry, divorce, have a child, or when a dependent dies. A change in status can result in the employer withholding more or less tax.
Note that the elimination of the personal exemption may have changed the number of allowances you should take. Review your tax situation and make revisions, if necessary.