A Beginner’s Guide to Filling Out Your W-4
Your W-4 is a four-page IRS form that basically tells your employer how much money to take out of your paychecks to cover taxes—and it was modified in 2020 to help people request the most accurate tax withholdings possible.
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How To Fill Out W4
The internal revenue service (IRS) requires employers to deduct a certain percentage from their salaries; this quota is known as tax withholding.
How then does one determine the percentage of salary that would cover the taxes? This is where the W-4 form comes in.
The W-4 form tells how much should be withheld by the employer. Employees must fill this form from the first day of work, stating how much should be deducted as it is entirely up to the employee.
It is essential to know how to fill the W-4 form. Thus a few steps will be discussed shortly.
The first step is to enter personal information and correctly to fill in your marital status. Tax rates apply to respective categories. For singles, if you have one job with no dependents and other tax-related situations, you can skip to sign and date the paper.
This step should be completed by people who have two or more jobs or have a working spouse(s). The tax rate is higher if the employer knows that your total earning is higher. For married people or singles with multiple jobs, if the earnings significantly differ from each other, one has to fill the form for just the one with the higher income to avoid over withholding.
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If you have dependents, whether children under a certain age or parents above a certain age that live with you, you can claim credits for them in this section; this helps reduce the tax rate deducted from your income.
This step is optional. In a case where you have additional income or earnings without tax withheld from it, and you prefer to be charged from it, you would have to note it in Step 2 above. You can make adjustments if the total amount charged exceeds the standards. This way, you will avoid outstanding taxes.
This part is relatively easy; it is where the form is signed and dated; if it is eluded, it will default to the single rate. The employer fills their portion and enters the data a
Every hired individual from January 1, 2020, is required to complete this form. Other employees could update their W-4 forms as it relates to individual life events.
The part-year tax withholding method is applicable as a special consideration if an employee has been unemployed for at least 120 days to avoid tax overpayment.
The essence of the W-4 form is to ensure that employers withhold just enough percentage attributed to tax. Underpayment of tax by an employee could result in the payment of accumulated liabilities and penalties at the end of the year.