Marriage, your first child, that promotion you've had your eye on for years -- each of these wonderful life events comes with something extra special: tax forms. Specifically, a new W-4. If you live in the United States, consider it the government's way of saying, "Congrats!"

But while you might consider a W-4 the gift that keeps on giving (or taking), it's also one that should come with instructions. Deductions, allowances, and basic addition can make this process confusing. Luckily, I've got a simple guide to W-4 Forms for you right here.

When to Fill Out a W-4

When you start a new job, you'll likely be asked to fill out a W4. You'll also want to update your allowances and withholdings when one of the following happens:

  • You buy a house
  • You have a child
  • You get married or divorced
  • Your salary or wage changes
  • You receive a dividend income
  • You or your spouse freelance
  • You only work part of the year

Am I Exempt from Withholding?

It's likely that the answer is no. To avoid withholdings, you must have no tax liability this year and no tax liability from the previous tax season. You may also claim exemption if your income for the year was $1,000 or less.

If you are not exempt, you'll have three worksheets to fill, in addition to your main W-4 form:

  1. Personal Allowances Worksheet (Everyone is responsible for filling this out)
  2. Deductions and Adjustments Worksheet (For those with many deductions)
  3. Two-Earners/Multiple Jobs Worksheet (For people who are married and both work and those people with more than one job)

If you need further assistance for discerning which allowances you should claim on your W-4, try this IRS withholding calculator.

How to Fill Out Your W-4 Form

Source: IRS

You've done the hard part, now it's time to take the information you've gained from filling out your worksheets and use it to complete your W-4. Here's how:

  • Lines 1-4: Fill in your name, Social Security number, address, and filing status.
  • Line 5: Add the total number of allowances you're claiming (e.g., the number you documented on line H of your personal allowances worksheet or line 10 of your deductions and adjustments worksheet).
  • Line 6: Are you withholding anything extra, such as the total from your two earners/multiple jobs worksheet? Put that number on line six.

Always complete your W-4 when you begin a new job and turn it in to your employer. Failure to do so will result in the IRS defaulting to withholding the maximum amount from your paycheck. And always remember to update your W-4 any time you experience a life change. Simply ask for a new W-4 from your employer and adjust to meet your new needs and circumstances.

To learn more, read about how to understand EBITDA.

This article does not constitute legal advice. The steps required to fill out a W-4 differ for every person, so you should seek your own legal advice and financial counsel to ensure you follow the correct process.

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Originally published Dec 21, 2018 7:30:00 AM, updated December 21 2018

Topics:

Accounting