Your W-4 will impact your finances throughout the year. If you fill it out properly and update it as needed, you should have the most accurate tax withholding. Too little withheld means you could owe extra money in taxes in April. Too much withheld means you are making the government a no-interest loan until you get your tax refund.

Whether you work full time or part time, you’ll be asked to fill out a W-4 for your job. Fill it out right so you take home as much pay as possible and not owe taxes at the end of the year. Here’s what to know about your W-4.

What Is a W-4?

A W-4 is a tax document formally known as an Employee’s Withholding Certificate. Your employer uses it to estimate how much tax to withhold from your paychecks. Using information you provide on the W-4 form – like your filing status, dependents, and adjustments – your employer calculates federal taxes for each pay cycle and withholds that amount from your checks. They send the withholdings to the IRS on your behalf, and the government uses the taxes for Social Security, Medicare, education, infrastructure, and other expenses.

How to Fill Out a W-4

Providing accurate information when you fill out a W-4 helps ensure the proper amount is withheld for taxes. While some areas of the form are straightforward, others may need more explanation or context to help you understand what to put down. The form is broken into five steps, each of which is explained below.

1 Personal Information

In the first step, you’ll fill out your personal information, including your name, address, Social Security number, and filing status. Filing status options include: single or married filing separately, head of household, and married filing jointly. If you are unmarried or married but not filing taxes with a spouse or partner and have no dependents, you would file as single. If you are unmarried, have at least one dependent, and paid more than half of your household costs, you can file as head of household.

If you are married and filing your tax return with your spouse, you’ll file as married filing jointly. This often entitles you both to more tax credits and a higher standard deduction than filing separately. You and your spouse may want to file separately in certain situations, such as if you have income-based student loan repayments (you and your spouse’s combined income when filing jointly could increase your payments) or plan to deduct medical expenses (which is easier to qualify for with a lower income). However, there are tradeoffs to filing separately, so consider consulting a professional.

2 Other Income

The next step asks for information about other income you earn or, if you’re married filing jointly, about your spouse’s income. You’ll fill this portion out only if either applies to you, such as if you have another job or are filing with your spouse. If these don’t apply to you, skip this step.

If either of these does apply to you, you can follow the instructions on the W-4 form. You can use the estimator tool on the IRS website or the Multiple Jobs Worksheet (included with your W-4 on page 3) to calculate how much extra should be withheld. If there are only two jobs total with similar incomes (such as you and your spouse’s jobs or if you work two part-time jobs), you can check the box on the form – but be sure it’s checked on the W-4 for your spouse’s job or your second job, too. You’ll need the information from the Multiple Jobs Worksheet for step 4.

3 Dependents

The next step on the form is for people who have dependents and qualify for the Child Tax Credit. A dependent is someone who lives in your household that you support, such as your child or a qualifying relative. To qualify for the Child Tax Credit, you must make $200,000 or less a year if you are single or $400,000 or less a year if you are married and filing jointly. If you have no dependents or don’t qualify for the Child Tax Credit, skip this step.

If you do have dependents, you’ll need to calculate the total deduction amount. The W-4 will tell you how much to deduct for each dependent type: qualifying children ages 17 or younger and qualifying individuals ages 18 and older. Add the deduction amounts for all your dependents and input the total on the line indicated.

4 Deductions

In step 4, which is optional, you can make other adjustments if you want to withhold more or less from your paychecks to make your withholdings more accurate. This is where you’ll report information from the Multiple Jobs Worksheet or the IRS estimator and other income that won’t have tax withheld from it but that you’d like to account for now, such as investments paid out.

If you plan to itemize deductions (which subtract from your taxable income to reduce the amount you owe) beyond the standard deduction of $10,000, there’s a spot for you to input that here too. Use the Deductions Worksheet that’s included on page 3 of the W-4 to calculate them. If you want extra money to be withheld from each paycheck, you can enter that amount here, too.

5 Sign and Date

The final step is signing and dating the W-4. Before you do so, go back over all the information you’ve entered to ensure it’s accurate. After signing and dating the form, you can submit it to your employer.

When Should I Update My W-4?
While you don’t have to update your W-4 each year, you should make adjustments when:

• You switch jobs or go through major life changes, including marriage, divorce, having or adopting a child, or earning new income, such as an additional job or investments
• You find you owe additional taxes or receive a large refund, based on recent tax returns
• You become aware of changes in the tax system, such as the changes that took place in 2020

The changes in the tax system that went into effect in 2020 led to a change in the W-4 form to try and make withholdings more accurate and increase transparency. Ideally, the new W-4 should improve accuracy to the point that you neither owe taxes nor receive a refund when you file.

If you start a new job, you will complete the new form. If you haven’t changed jobs but have had any of the above-mentioned life or earning changes, you should also fill out the new form.

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