Your W-4 is an important thing to get right because it ultimately decides how big your tax refund is – or if you owe the IRS money
If you are an employee, you pay income tax through withholding – tax money your employer takes out of your paycheck each pay period.
You can determine how much gets taken out by filling out Form W-4 [Employee’s Withholding Allowance Certificate]. If too much gets taken out, you will receive a refund when you file taxes. If not enough is taken out, you will have to pay the IRS.
You will be asked to fill out a W-4 when you start a new job. But you can also fill out a new W-4 any time if you wish to adjust your withholding. You should especially be sure to do so after major life events such as getting married or the birth of a new child.
How to Fill Out the Form
The first part of the form should be easy enough. It’s just your personal information: name, address, social security number, etc.
The complicated part doesn’t come until line 5, when you have to enter the total number of allowances you are claiming. Allowances determine how much money is withheld from your pay. The higher the number of allowances, the less is withheld.
Most people will be able to use the Personal Allowances Worksheet directly above the form itself to figure how many allowances they should claim. A general rule of thumb to follow is that you should claim one allowance for every person in your family. For example, a married man whose spouse doesn’t work and who has two kids should probably claim four allowances.
Single people actually have something of a choice. They can either claim one or two allowances. Claiming two allowances means the tax withheld will likely ends up very close to their total liability, resulting in a very small refund or even a tax due. If you really want to be 100% sure that you won’t end up owing anything, it’s probably best to claim one allowance. More will be withheld, but you’ll also get a bigger refund.
Special Cases
Here are some tips to point you in the right direction, especially if you have an unusual situation.
- Married couples who plan to file a joint return should calculate their allowances together and divide the total between them. You can use the Two-Earners/Multiple Jobs Worksheet on the second page of the form to calculate your total number of allowances.
Here’s what the IRS has to say about it: “If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. Use only one set of worksheets. You can divide your total allowances any way but you cannot claim an allowance that your spouse also claims.”
- If you plan to itemize deductions or claim certain credits or adjustments to income, there is a Deductions and Adjustments Worksheet on the second page of the form that can help you work out how many allowances to claim.
- If you are an employee at more than one job, you can also utilize the Two-Earners/Multiple Jobs Worksheet on page two of the form.
Once you’ve calculated how many allowances you should claim, you can double check your work by utilizing the IRS Withholding Calculator.
Remember, that a tax refund is not necessarily a good thing. Although it’s nice to receive a big lump of money from the IRS when you file taxes, that’s money that you could have been spending, saving, or investing all year long. The goal is to get your estimated tax refund/tax due as close to $0 as possible.
Photo via Quinn Dombrowski on Flickr.
I have 2 questions: First, I am separated, but still married. Which filing option do I choose? Single or married filing separately? Or it doesn’t matter?
Second, I have a child who can be claimed as my dependent only. How many allowances do I claim? And what is the best scenario for me? I am a full time graduate student and would like to assure I bring home as much as possible, but also want to make sure that I don’t owe anything in the end. Thank you.
Hi Kasia,
According to the IRS, your marital status on the last day of the year determines your marital status for the entire year. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
When it comes to claiming allowances, the general rule is that the more you claim, the less withholding you’ll have taken out of your paycheck. If you claim zero, you’ll have the maximum amount taken out. If you claim a large number, you’ll have less taken out. The absolute ideal scenario is to have your tax liability (or refund) at the end of the year be as close to zero as possible.
I also suggest taking a look at the IRS Withholding Calculator. It only takes a few minutes to complete and will give you the most accurate amount of allowances to claim in order to reach that break-even point at the end of the tax year.
Do both, spouse and I have to fill out the two earner worksheet on the W4 or the one with the highest paying job out of us?
Thanks for any help
Hi Viki,
Your withholding will typically be most accurate when all allowances are claimed on the W-4 for the highest paying job and zero allowances are claimed on the other.
Im married and i have two kids. How or what can i do to get back more money on each payday? At the moment im getting back less on each paycheck then some of my co workers who make the same rate of pay and who are married with the same amount of kids and they get back more…what do i change on my forms at work? To get more back on each payday? Thank you.
Hi Vicki,
Keep in mind that the more allowances that you claim, the less that is withheld from your paychecks (with a smaller refund at the end of the tax year).
For example, if I claim three allowances, I am getting a higher paycheck each week than someone who is claiming zero or one allowances. However, I am also receiving a smaller refund at the end of the financial year or even increasing my chances of owing money to the government.
I have just got married and will be filling jointly for the first time. Is it ok to keep my W4 still showing “single” and 0 – is that the maximum possible withholding? Basically we have lots of unknowns which aren’t covered by any easy worksheet, so it is not easy to work out what our total tax burden will be, and whatever happens we do not want to owe tax in the 2014 return.
Hi Rich,
Yes, you can keep your W4 at 0, meaning the maximum tax will be withheld. This means you are much less likely to have tax due and more likely to receive a tax refund.
I am single and receive a pension and going to start working part-time. Would it be wise to claim 1 or 0 on the w-4 form? Really would appreciate your help.
Hi Rosalina,
If you claim 0, you will have more taxes taken out each pay period but will receive a larger refund when filing your taxes. If you claim 1, you will have less taxes taken out each pay period but will probably break even when filing your taxes, or receive a smaller refund.
If you want to be safe and expect a refund when filing your taxes at the end of the year, claim 0.