5 Things You Should Know Before Filling Out Your W-4

Max Pixel

If you’re employed, you’ve probably touched a W-4 form. Now, before you panic about not understanding financial jargon, we’ll just tell you that this form is actually fairly simple… when you know what to fill out. Here’s why the form is relevant to you along with some things you need to know before completing it.

1. What even is a W-4?

A W-4 form¬†is issued by the Internal Revenue Service to your employer, and you and your employer complete portions of it. The form allows you to dictate how much money your employer should withhold from your paycheck for federal taxes. The more you withhold, the more you get back on your tax return. ūüė鬆It’s like giving the IRS an interest-free loan, and during tax season, the IRS returns it to you.

2. Decode the form.

A W-4 form looks like this¬†with a bunch of places to add “1” and quite a few conditions. All you need to figure out is if each line, marked by letters, applies to you. Typically, you’ll only fill out the first page unless you want to itemize your deductions and make adjustments. In normal person language? Don’t fill anything else out unless you want to take out specific extra amounts or adjust your tax bracket, which most people won’t want to do.

The bottom portion of the first page is the actual portion your employer cares about, which is just a reiteration of what you filled out at the top. The number you add up at the bottom of the first page is how many “allowances” you have. The more allowances you have, the less money will be taken out of your paycheck, and the less you’ll receive when tax return time rolls around.


3. Withholding tax is a thing.

Not familiar with the term “withholding”? It’s alright. Essentially, when you have to choose how much to withhold from your paycheck, you’re choosing how much money you’re giving the IRS from your paycheck. Not sure what to claim as an allowance? Here’s an easy step-by-step guide:

Claim 0 allowances total if:¬†Someone else claims you as a dependent on their tax return (like if you’re in college and your parents claim you). You can also claim 0 if you’re single and have just one job. You’ll likely get a tax refund back.

Claim 1 allowance total if: You’re single and have one job. You’re also likely to get a tax refund back.

Claim 2 allowances total if:¬†You’re single, have one job and just happen to want to claim more allowances so that you pay less each month in taxes. If you have more than one job, you’ll also claim two allowances. And if you’re married and filing together, or you’re married and you’re filing your spouse as a dependent, you’ll claim two allowances. You’re more likely to break even during tax time (meaning no refund) if you claim two allowances.

Claim 3 or more allowances total if:¬†You’re married and you have a child, and for each child, you should add an allowance (so if you have three kids, you’d claim five allowances).

4. Do I file as “head of household” or “single”? Can’t they be the same thing?

Nope, they’re not the same. Even if you’re single and you live alone, you probably wouldn’t file as head of household unless you fit all of¬†the below descriptors:

  • You pay for more than half of the household expenses
  • You’re considered unmarried for the tax year
  • You have a qualifying child or dependent

Most people would mistakenly file as head of household knowing that the first two points are relevant to them, but the key point here is the “qualifying child or dependent.” And no, your therapy dog sadly does not count.


5. Know when to change your W-4 withholding status.

You can change your status at any point throughout the year, depending on what changes in your life. Here are the reasons why you’d want to revisit and revise your W-4:

  • You get a second job:¬†If you’re making a second form of income, adjust your W-4 and add it as an allowance.
  • Your spouse gets a job or changes jobs:¬†No matter what happens, you have to change your W-4 if your household income changes. If you’re joint filing and you reach a different tax bracket, you¬†must modify your allowances.
  • You become unemployed and stay that way for the rest of the year:¬†If you got laid off or fired and¬†remain¬†unemployed through the end of the year, you need to adjust your W-4. Increase your allowances to make sure you’re not having too much tax withheld.
  • You get married¬†or divorced:¬†Becoming married or divorced will greatly affect how you file your W-4. If you just got married, you’ll want to either file a joint W-4 or claim an extra person on your allowances. If you got divorced, you’ll go back to single status or head of household status without an extra allowance.
  • You had a baby or adopted one:¬†You should claim an additional allowance if you added a dependent, like a baby, in your life. You can also qualify for the¬†Child Tax Credit and Child Care Tax Credit.

We know there’s so much to learn about your W-4, but doing it right is necessary. Make sure you’re taking out or withholding the proper amount of money for¬†you.