When Should You File a New W-4
If you’ve ever had a job, you’ve filled out a W-4 form. This piece of paper is the reason you look at your paycheck and wonder where some of it went. A W-4 is an IRS form used by your employer to determine the amount of taxes to withhold from your paycheck. And it’s all based on what you file.
So when do you complete a W-4? Only when you’e hired? The beginning of the New Year? While neither of these answers are necessarily incorrect, they don’t capture the big picture. Largely, it depends. A W-4 can be filled out whenever you’ve experienced a life event — whether it be marriage, buying a house or having a child (this covers adoption, too). Other situations include getting a second job, your spouse getting a second job or even getting divorced.
Any time you file a W-4 you’re basing it on a set of allowances, which are employee-claimed exemptions used to determine how much pay to subtract from each paycheck to later submit to the IRS. The more you claim, the less income tax will be withheld and vice versa. The basic allowances people claim include themselves, spouses, children or any other dependents.
Each W-4 includes series of worksheets you can use to calculate how many allowances you should be claiming. There are separate worksheets for separate scenarios: married couples, individuals making other types of income, and single individuals.
This form has a direct impact on your finances. If you withhold too much, you end up getting a tax refund. If you withhold too little, you may owe taxes. It all boils down to regularly updating your W-4 to reflect your life. Maybe you did get hitched, or maybe you just wanted more money each paycheck. Whatever the reason, there’s no limit to how many times you can file your W-4.
Have more questions? Check out our W-4 calculator here.
Originally published at www.paycheckcity.com.