Gen Z Series: Completing a W-4

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We have all been there. We start a new job, whether it is a career starter or after-school gig, and we are excited. Then, HR brings us all these documents to sign, and one is Form W-4. The assumption is that we know how to complete it.  But do we really? In this blog post, part of our Generation Z series, we will break down the mysteries of Form W-4 and what its information really means.

What is a W-4?

Employee’s Withholding Allowance Certificate, Form W-4, is completed by employees so employers can withhold the appropriate federal income taxes from their pay. It is among the shortest and most known IRS forms. The amount withheld depends on the information submitted and the salary earned during the pay period. These taxes are remitted to the IRS by employers on behalf of the employee.

When should you complete a W-4?

At the start of each new job, employees complete the form with their personal information and preferences. Employees should consider completing a new form each year or whenever personal (such as marriage or having children) or financial situations (such as a spouse retiring) change. These changes may affect the tax you owe and, hence, your withholding should be adjusted.

Completing a W-4

Step 1a-b: Personal Information

Here, you provide your employer with your personal information such as your name, address, and Social Security Number so your taxes withheld can be applied correctly.

Step 1c: Filing Status

Choose from the three options: 1) single or married filing separately, 2) married filing jointly or qualifying widow(er), or 3) head of household. The single and married options are easy to understand, but the others can be complex.

Depending on your circumstances, choosing “married filing separately” may be an option if both you and your spouse work, and you are concerned that an insufficient amount will be withheld, or in the past not enough was withheld. Consult a tax advisor if needed.

To file as a qualifying widow(er), you need to meet the following requirements:

  • Qualified for the married filing jointly status in the year of the spouse’s death.
  • Have not remarried since the year your spouse died.
  • Have a qualifying dependent that lives with you for the WHOLE year.
  • Pay more than 50% of the costs to maintain a home for you and your qualifying dependent

Head of household requirements are like the qualifying widow(er) requirements, but for unmarried individuals. You need to meet the following requirements:

  • Be unmarried at the end of the tax year.
  • Have a qualifying dependent that lives with you for the at least HALF of the year.
  • Pay more than 50% of costs to maintain a home for you and your qualifying dependent.

Step 2: Multiple Jobs or Spouse Works (Optional)

This section should be completed if you hold more than one job or if your spouse also works. The IRS encourages completion of this section to avoid owing additional tax and potential penalties being applied.

Step 3: Claim Dependents (Optional)

This step enables you to calculate the amount of the child tax credit and the credit for other dependents that you may be able to claim when you file your return. For individuals with total income of $200,000 or less ($400,000 or less if married filing jointly), you would multiply the number of qualifying children under 17 by $2,000. If you have other dependents, you multiply that number by $500, and then add the two amounts.

Step 4: Other Adjustments (Optional)

This is where you can request to have additional taxes withheld on non-wage income. You should consider additional withholding if you are expecting a large tax balance due.

Finally, once everything is complete, sign the form and provide it to your employer. As we stated earlier, consider revisiting your Form W-4 each year to ensure you have the optimal withholding.  If you have questions, please ask them below. We’d be happy to address them and help you better understand Form W-4.

Updated: Mar 28, 2022

About the author
Diane DeCesare of Armanino LLP is a member of XPX Philadelphia

You need a trusted advisor to work with your team to maximize cash flow through reduction to tax and understanding of financial terms of the deal.