We touched briefly on the W-4 tax form in 1st DAY ON THE JOB – DOCUMENTS TO COMPLETE. The W-4 form is largely described as an IRS form that let your employer know how much money to withhold from your paycheck for federal taxes. Investopedia mentions, “Your employer sends the money it withholds from your paycheck to the IRS and that counts toward paying the annual income tax bill you calculate when you file your tax return in April.” To most, completing any tax form on their own can be intimidating. But here’s how to complete your W-4 tax form with confidence.
Completing the W-4 form
Your employer will most likely provide you with a copy of the W-4 form. But you can also access the form at the IRS website.
The most important part to completing your W-4 tax form is page 1, the Employee’s Withholding Allowance Certificate. The top part of page 1 gives you the General instructions on how to complete the Form. But the Employee’s Withholding Allowance Certificate is the only part that will actually be submitted to the IRS.
Page 2 is the continuation of the General instructions.
Starting on page 3, you have the Personal Allowance Worksheet, which is only for your personal record. The Personal Allowance Worksheet will give you some suggestions about how to fill out the Employee’s Withholding Allowance Certificate. Keep in mind, the allowance worksheet is just a suggestion.
The Thing About Allowances
The more allowances you have, the less taxes you’ll have to pay on each paycheck. However, this smaller amount of taxes coming out of your paycheck could mean you’ve paid to little taxes. As a result, you may owe taxes when you file taxes.
On the contrary, having a lower number of allowances mean you pay more taxes on each paycheck. But you more likely to get a tax refund when you file taxes due to paying too much taxes.
|Allowances||Taxes taken from paycheck||Tax Day|
|1||$$$||Break Even||(Might get a small refund or owe a very small amount)|
|2||$$||More than likely owe taxes|
If you’re not married with kids and a house, you’ll typically have 0, 1 or 2 allowances.
- If you claim “0” allowances
- You’ll likely pay too much in taxes each pay check. Since you paid too much, you’ll get a refund when you file taxes
- If you claim ”1” allowances
- You’ll pay a little more in taxes than you would if you claim 2 or more allowances. But you’ll likely pay the accurate amount of taxes from your paychecks.
- If you claim “2” allowances
- You’ll underpay taxes in each paycheck. And since you’ll pay too little in taxes, you’ll owe taxes when you file your taxes.