The form W-4, also known as Employee’s Withholding Allowance Certificate, is an IRS form that employees complete and provide to their employers, to determine the amount of federal income taxes to withhold from the employees’ paychecks. The W-4 form helps employees adjust withholding based on their personal circumstances, such as whether they have children or a spouse who is also working. The IRS always recommends employees check their withholding any time their personal or financial information changes.
Important Tax Law Update
Under the Tax Cuts and Jobs Act of 2017, the deduction for personal exemptions is repealed through 2025. This means that, effective January 1, 2018, personal exemptions are suspended (no longer allowed) until January 1, 2026. New withholding tables will be issued to reflect the changes to tax rates, tax brackets, the elimination of personal exemptions and an increased standard deduction under the new law.
Claiming Allowances on the W-4 Form
The form W-4 is designed to be flexible; you can submit a revised W-4 to your employer anytime your situation changes. The withholding allowances worksheet ensures proper taxes are withheld in different situations. Ideally, withholding reduces the amount of tax you pay when your annual tax return is due. The amount withheld is calculated based on your income, marital status, number of dependents, and number of jobs held. Therefore; the more allowances you claim, the less money will be withheld from your paycheck. Likewise, the fewer allowances you claim, the more money will be withheld from each paycheck.
Claiming Exemption from Tax Withholding
The W-4 form also allows you to request an exemption from tax withholding if you had no income tax in the previous year and you do not expect to owe any taxes in the current year.
Note: If another person can claim you as a dependent on their tax return, you can’t claim exemption from withholding if your total income exceeds $1,050 and includes more than $350 of unearned income (for example, interest and dividends).
Filing a new W-4 Form
For accuracy, you should complete all sections of the W-4 worksheets that apply. You can download a new Form W-4 to update your information. Your employer’s human resources or payroll department should also supply a form if you ask. After you update the new form, take it to your payroll department. Do not send it to the IRS.