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How to Fill Out Your W4

My name is Greg Reed and I’m the Head of Tax here at SmartBooks. Today, I want to review with you an important form, Form W4, Employees Withholding Allowance Certificate. The form itself is very basic. It only has seven lines. However, the supplemental schedules attached can be complicated. Let’s review.

W4 Lines 1 through 4: Basic Information

Lines one through three are basic information, so you’ll want to make sure that you fill these out with care so that you don’t have any clerical errors when filing this with the IRS. Line four is only going to apply to you if you’ve recently changed your last name, and typically when you do that, you’ll get a new social security card. If you haven’t received that social security card, then there may be a situation where your employer will need to withhold at the highest rate, which is something that you may want to avoid.

W4 Line 5: Withholding Allowances

Now, getting into line five is where we get into the withholding allowances. To determine the withholding allowances on line five, you’re going to want to go to the supplemental schedules. The first supplemental schedule that you’ll see is the personal allowances worksheet. This worksheet contains several line items and each line item must be completed in order to determine your total with how withholdings on line H. Read each line carefully to make sure that it either applies to you or doesn’t apply to you, and make sure that you fill out the correct number on that line. Add the numbers up and and put that number on line H. Now, this line H may be the number that you put on your line five of page one of the Form W4, however if you have any special circumstances on your tax return you may need to complete the other two schedules.

W4: Deductions, Adjustments and Additional Income Worksheet

The first schedule is the deductions, adjustments and additional income worksheet. This worksheet’s going to be completed if you itemize your deductions or if you have additional non-wage income. Non-wage income includes 1099 income, which includes interest, dividends and self-employment income. If you do have any significant income from your non-wage income, you may want to review your withholding options with your current CPA or feel free to always reach out to us and ask for help as we will always. We’re always here for you.

W4: Multiple Jobs Worksheet

Now, the next worksheet that you’ll want to consider or may apply to you is the two multiple jobs worksheet. This worksheet’s going to be completed if you have two jobs yourself, or if you’re married and both you and your spouse work. Now, this form should be completed. It’s somewhat complicated and should be completed with care, and I would suggest personally that you review this form with your CPA prior to submitting it just to ensure that you have proper withholding allowances. Now, keep in mind line nine here, your answer here on line nine is going to re input on line six. Now, line six is an additional amount withheld from from your paycheck. This is an actual dollar amount, whereas line five is number used by your payroll company to determine the amount withhold. Now, moving on to line seven this is only going to apply to you if you have recently, or if in the prior year you didn’t have any tax liability, and in the current year, you don’t expect to have a tax liability. Most people, this is not going to apply to, however it may apply to you, and in that case you would write “exempt” right here.

Reasons to Complete or Update Your W4

Now, what are the situations where you may need to complete a form W4? Well, the obvious ones are when you get a new job, but you may also need to complete if you’ve been recently married, divorced, if you recently had a child, maybe you started taking care of a parent or a relative, and you can claim the head of household or you can claim them as a dependent. There are certain situations where you may need to revisit W4. The other two situations are a based on your 2018 tax return at this point, however, whenever you’re listening to this, it would be your prior year tax return. If you withheld too much or too little, you’ll want to change your allowances. You may want to change your allowances to ensure that you don’t get hit with any underpayment penalties or that you’re not essentially using the IRS as an interest free savings accounts. That money could potentially be in your pocket throughout the year rather than receiving a check at the end of the year or in April, so.

As always, we are here to help you, and if you have any questions filling out your W4, simply contact us.