The W-4 is an IRS form you complete to let your employer know how much money to withhold from your paycheck for federal taxes.

Accurately completing your W-4 can ensure you don’t have a big balance due at tax time. It can also prevent you from overpaying your taxes, putting more money in your pocket during the year.

Claiming allowances

The W-4 is based on the idea of “allowances.” The more allowances you claim, the less money your employer will withhold for taxes.

You get one allowance for yourself, one for your spouse and one for each dependent you report on your tax return.

You can claim additional allowances in certain cases such as planning to itemize your deductions when preparing your return, your filing status is “head of household” or if you’re eligible to claim a tax credit for child care expenses.

Requesting additional withholding

The W-4 also helps you determine whether you need extra money withheld from your pay. If you work more than one job, have self-employment income or if your spouse earns income too, the personal allowance worksheet on Form W-4 will not incorporate this other income into your allowances, and too little will be withheld.

This is because the additional income that you end up reporting on your tax return may put you in a higher tax bracket. By voluntarily increasing your tax withholding on the W-4, you can avoid having to make an additional lump-sum tax payment when you file.

Filling out the W-4

The W-4 form, otherwise known as Employee’s Withholding Allowance Certificate, includes a series of worksheets you can use to calculate the appropriate number of allowances to claim.
After calculating your additional allowances, report your total allowances on the actual W4 form to your employer.

Updating your W-4

The IRS recommends that if you work more than one job, or if you and your spouse both work, that you claim all your allowances on the W-4 for the highest-paying job. You should also complete a new W-4 every time a major life event occurs, such as a marriage, the birth or adoption of a child or a spouse getting or losing a job. These things can have a direct effect on the amount of tax you owe, so your W-4 should account for them.