Did you start new job? As an employee and taxpayer you will need to complete a W-4. It’s a great document for tax planning, however folks often have a hard time figuring it all out and are often unsure if they submitted the correct information. My resource here answers 7 important questions about correctly completing and submitting a new W-4 tax form.
7 Helpful Answers to 7 Hard W4 Tax Form Questions
Here are the answers to seven tough questions you might have regarding the completion of this IRS document.
1. Why does my employer require a W-4?
Anytime an employer hires an employee, the IRS requires the employer to obtain a W-4 from the employee. The form is necessary because your employer must withhold estimated federal taxes, or payroll taxes, from your paycheck. Your completed W-4 gives your employer the information they need to withhold your federal taxes.
2. Does my W-4 go to the IRS?
Generally, it’s not submitted to the IRS. Instead, your employer is required to keep your W-4 on file while you are employed there and for some time thereafter. If you claim ten (God bless your soul) dependents or more, your employer is required to send it to the IRS. Also, if you claim to be tax exempt, which means you will not have any Federal taxes withheld from your paychecks, your W-4 will be forwarded to the IRS.
3. How do I complete the Personal Allowance Worksheet?
The Personal Allowance Worksheet is for your own records, and it is not mandatory that you complete it. If you need to use the Personal Allowance Worksheet to determine the number of allowances you will be claiming, follow the form’s instructions: enter ‘1’ for yourself, if you are single with one job, married with one job and your spouse does not work or you and your spouse’s wages do not exceed $1,500 per year, if you file head of household, and if you have greater than $1,800 in childcare expenses.
On Line D of the Personal Allowance Worksheet, enter the number of dependents you claim on your tax return. On Line G, you will enter any required information for the child tax credit. Then, on Line H, you will total lines A through G.
4. How do I complete the Withholding Allowance Certificate?
The Withholding Allowance Certificate is the portion of the W-4 that is returned to your employer. You will enter your name, address, Social Security number and marital status. You will also enter the number of allowances you are claiming. If you are interested in withholding any extra money from each of your paychecks, you will document your request on the Withholding Allowance Certificate.
5. Can I elect to be tax exempt?
If you choose to be tax exempt, you must meet the IRS’ criteria. To be tax exempt, you need to be claimed as a dependent by another taxpayer and you must meet the current tax year’s income stipulations for electing tax exemption.
6. Do I need to complete the Deductions and Adjustments Worksheet?
This worksheet should be used if you have two or more jobs, if your spouse also works or if you plan on itemizing your deductions at tax time.
7. When should I update my W-4?
You should update and resubmit your W-4 if you have had a change in marital status, if you would like to change the number of allowances you claim or if you need to make any other changes to your W-4.
While initially completing your W-4 can be a challenge, having a thorough grasp on the information required can save you a lot of frustration. Understanding the components of the W-4 can also help you gain a more desirable income tax return. The W-4 can be a great tool in tax planning if used correctly. If you have further questions regarding your withholding allowance, consult your tax professional for advice.