Chances are if you're reading this article you just landed a new job and need to know how to fill out your W4.
Lucky for you, unlike past tax forms you're used to filling out that are confusing, annoying and tedious – the 2020 W4 form is more simple to fill out.
You won't need to worry about internal revenue service lingo and the new 2020 W4 makes it easy since you don't have to worry about claiming the right deduction!
Let's learn how to fill out W4 forms below!
What is a W4 Form?
The W4 form is a form you need to complete to let your employer know how much they need to take from your paycheck to pay your federal income taxes.
Every time you start a new job, you need to fill in said W4 form. The IRS themselves recommend completing a new W4 form every calendar year to make sure you’re always paying the right amount of taxes.
The New 2020 W4 Form:
In 2020, there will be a new W4 form. The main difference? There won’t be any more “withholding allowances”. Withholding allowances are certain exemptions from federal income tax. If the employer claims a higher allowance, then they withhold less money to pay the federal income tax.
Now, in 2020, the withholding allowance means that employees can claim other deductions on the form. This may be a good thing, but several calculations need to be done in order to do the right amount.
Together with the new W4 form are new 2020 tables: the Percentage Method Tables and the Wage Bracket Method Tables for the automated and manual payroll systems respectively. Depending on whether you manage your payroll manually or automatically, you’ll be using these two different tables.
How to fill out a W4 Form:
Filling out tax forms doesn't have to be confusing. All the common IRS language: Number of allowances, Withholding allowance, Payroll Taxes, Gross Income, and so on.
Luckily, the W4 Form that is four pages isn't that tricky. You simply have to fill out page 1 of the form and turn it in to your employer:
First, Enter Personal Info:
Fill in the form with your entire name, address, Social Security number and filing status. Those that are single filers with a basic tax situation can sign and date the document and are pretty much good to go.
Second, Multiple Job & Spouse Section:
There are a couple of different ways to fill out this section. You can either choose to go to the IRS’ Tax Withholding Estimator and complete it using the estimate in the fourth step.
Option B is to fill out the Worksheet which is on page three of the W4 Form and enter the results from the fourth step. Advice from the IRS is that the worksheet should come with only one W4 form and that you should only enter the result for the highest paying job.
Option C is for those who only have two jobs – this makes sense if both jobs have a similar pay.
Third, W4 Dependent Section:
Step three is an important step for those with dependents. It checks your eligibility for the Child Tax Credit as well as credit for other dependents.
The IRS has a pretty complex definition of dependent, so it makes sense to read through the document carefully. Put simply, a dependent is a child or relative who lives and depends on you financially.
Fourth, Other Adjustments:
This is the section where you let the IRS know if you want more money to be withheld from your paycheck. This is in case your employer withholds too little tax over a year and you may end up with a large tax bill and penalties in the next year.
To make sure that doesn’t happen, tell your employer in this section.
Last Step: Sign your W4 Form!
Sign and date the form, and you’re good to go! Simple turn it into your employer once it's done.
What about page 2-4 on the W4 form?
Page 2 of the W4 form includes the general instructions, but doesn't need to be turned in. The steps above should suffice, however, page two also contains specific instructions if needed.
Page 3 is for the option in Step 2(b) on Form W-4. If you chose that option, you would complete the page 3 worksheet (which calculates the total extra tax for all jobs) on only ONE Form W-4. Withholding will be most accurate if you complete the worksheet and enter the result on the Form W-4 for the highest paying job.
Page 4 contains withholding tables that are to be used in conjunction with page 3 and kept for your personal records.
The Difference between W2 and W4 Form
As mentioned above, a W4 form is a certificate that lets your employer know how much federal income tax they need to withhold from your paycheck.
This number depends on your salary, marital status, your dependents, and your income from other jobs. The IRS recommends filling out a W4 form every year to make sure you’re paying the right amount of taxes year after year.
The W2 form is another document that reports all wages earned, taxes and deductions that were withheld during the year. This is a form that the employer will file for the employee to keep track of all salary information. W2 forms are used for employees; contractors and freelancers need to fill in a different form.
What happens to this W2 form?
Employers are supposed to send a copy of the W2 form to their employee and another one to the IRS. They need this document ready for the employee by January 31st so they can file their taxes appropriately.
It’s a pretty easy form to fill: it has two boxes, one with how much money the employee has earned and another one with the total amount withheld for tax purposes.
- Box 1 on your W2 shows your gross income annual income
- Box 2 will show how much of your gross income was taxed that year
Final Take on Filling Out Your W4 Form:
The pros of the new 2020 W4 Form is that you don't have to worry about claiming allowances.
When it comes to income tax forms; knowing what to withhold, what to claim, your taxes witheld and another litany of technical IRS jargon – the W4 form is not overly complicated.
Question about the W4 Form? Comment below!
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and many more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their newborn son, their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! In case you were wondering, Josh uses Personal Capital to track his net worth and his first investment account ever was an Acorns account 😎