Your W-4 form lets your employer know how much federal tax they should withhold from your gross wages on each paycheck. The amount they withhold from your paycheck is then paid directly to the IRS by your employer. Your federal tax withholding amount is based on your filing status, how many jobs you have, number of dependents, and other tax return items that could impact your tax situation. If you received a large refund or owed a large amount of taxes this year it may be a good time to revise your W-4 form.
Completing a new W-4 every time you start a new job is required, but you don’t need to update it every year unless you’d like to update the amount of taxes withheld from each paycheck. However, you should consider adjusting your W-4 after major life events such as getting married, having a baby, or turning that hobby into a side gig.
Updating your withholding
There are many ways to update your withholding. How you update your withholding generally depends on your human resources department or the payroll provider (company) your employer uses. You may be able to do this yourself via a payroll platform, by updating your W-4 electronically or providing a paper copy to your employer. Reach out to your human resources department or your employer’s payroll provider for details about how you should do this.
Increasing your withholding
You might decide to increase your withholding if you want to decrease the amount of tax you owe on your tax return or get a larger refund. Increasing your withholding should lower the chances of owing when you file your taxes. It will also result in more taxes being taken out of each of your paychecks - so your paycheck amount will be lower.
To increase your withholding, you can do one of the following on your W-4:
Decrease the number of dependents or choose not to claim them for withholding purposes
Change the amount of extra withholding on line 4(c)
Decreasing your withholding
You could also decide to decrease your withholding if you want to increase the amount of tax you owe or decrease your refund on your upcoming tax return. However, it’s important to note that decreasing your withholding could increase the chances of owing when you file your tax return. Decreasing your withholding will also result in less taxes being taken out of your paychecks - so your paycheck amount will be higher.
To decrease your withholding, you can do one of the following on your W-4:
Increase the number of dependents
Change the amount of extra withholding on line 4(b)
Getting your tax bill to $0
If you aim to get as close to zero as possible when you file your taxes, make sure that you choose the correct filing status, number of dependents, and accurately estimate your other sources of income, including deductions, and/or take advantage of the line for extra withholding on your W-4 when you fill it out. There is a supplemental deductions worksheet for Step 4(b) which includes things such as any itemized deductions which will help you figure out how to complete this on your own.
Understanding your updated W-4
Remember, your W-4 doesn’t show total withholding, just changes you have made to your withholding. So if your W-4 has excess withholding of $50 on it, this means that your withholdings on your paycheck will increase by $50 each pay period, and your check will go down $50. You can check your pay stub to see your total federal tax withheld amount. If your state has income tax, your state will have a separate W-4 form to fill out if you want to adjust your state tax withheld from each of your paychecks. If you have additional questions, your human resources or payroll provider should be able to help!
This content is provided for informational purposes only and should not be construed as tax, legal, financial, accounting, or other advice. Rules and regulations vary by location and are subject to change, so please consult with an expert if you need advice specific to you.
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