What is a W-4 Form?

If you’ve ever started a job, you’ve filled out a Form W-4. Form W-4 is the federal tax form filled out by filers to allot tax withholding.

The form ensures that your employer withholds the correct amount in federal tax.  Unless you’re exempt from withholding (if your income is less than $950, only $300 of which is unearned income from dividends and interest) you’ll need to fill out a W-4 with each new employer.

For those who are not exempt, Form W-4 will take you through a Personal Allowances Worksheet to determine how many allowances you may claim. You are allowed to claim one allowance for a variety of qualifications.

  • For yourself if no one can claim you as a dependent.
  • If you are single and work only one job or your second job makes less than $1,500 OR if you’re married and your spouse doesn’t work or brings in less than $1,500.
  • For your spouse, but may choose not to if they work, or if you work more than one job.
  • For each of your dependents (excluding your spouse).
  • If you qualify for head of household filer status. To qualify to file as a head of household, generally you must be unmarried and pay more than 50% of the costs of keeping up a home for yourself and your dependents.
  • If you expect to spend $1,800 on qualified child or dependent care expenses.

There are also a few allowances allotted for child tax credits, for those single earners making less than $61,000 ($90,000 for married filers). If you are in that income bracket, you may claim 2 allowances for each child, less 1 if you have 3 or more children. Single filers making between $61,000 and $80,000 (between $90,000 and $119,000 for married filers) can take 1 allowance for each child, and an additional allowance for numbers of children exceeding 6.

The second half of your W-4 will consider your itemized deductions. You’ll want to have an idea how much you might spend on mortgage interest, charitable contributions, state and local taxes, and medical expenses in excess of 7.5% of your income.  If you are in a two-earner household, you’ll want to have your spouse’s salary handy. You’ll need to know the amount of both of your wages to determine if an additional withholding amount is necessary.

In addition to the above, you’ll need standard information like your name, address, social security number, etc.

Try to make sure you fill out your W-4 as accurately as possible. Claiming too many allowances can result in an inadequate withholding, which can lead to a massive tax bill at the end of the year, and no one wants to get hammered with one of those.

Claiming too few allowances can lead to a larger than necessary withholding. This is much less of a problem, as you’ll get all the extra withholding back when you sort out your taxes at the end of the year. But, you will have a little less cash throughout the year, since you’ll be giving the IRS an interest-free loan with every paycheck.

Go in with all the relevant information, and plan as accurately as possible. That way, you’ll be able to spend or invest your money as you like, throughout the year.

If you need help filing your taxes this year, you may want to consider both Turbo Tax and H&R Block.  Their free online tax software can make your tax nightmares disappear.

Published or Updated: April 4, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

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