What Do You Do With a W-4 Tax Form?

What is IRS Form W-4?

The IRS W-4 form, also known as the Employee's Withholding Certificate, is a document provided by the Internal Revenue Service (IRS). It is used by employees to inform their employers about their federal income tax withholding preferences.

When starting a new job, you should  complete a W-4. By filling out the form, you provide your employer with information that helps them determine the appropriate amount of federal income tax to withhold from your paycheck. The W-4 consists of several sections that require you to provide details such as your name, address, Social Security number, filing status, and withholding adjustments such as dependents, additional income, and deductions.

What are the most recent changes with Form W-4?

First, withholdings are the amount of local, state, and federal taxes taken out of your paycheck. You fill out a Form W-4, Employee's Withholding Certificate. Employers use the information provided on a W-4, along with IRS withholding tables, to calculate how much tax to withhold from an employee's paycheck throughout the year.

The Tax Cuts and Jobs Act (TCJA) significantly changed how the federal income tax system works. The TCJA made several changes, including:

• Doing away with personal exemptions
• Increasing the standard deduction
• Making the Child Tax Credit open to more people

Older versions of Form W-4 relied on personal and dependent exemptions to calculate withholding Personal and dependent exemptions are no longer used under current tax law. The Form W-4 now uses a step-based approach that considers income, filing status, dependents, credits, and other adjustments to estimate withholding more accurately.

What are federal withholdings and state withholdings?

The U.S. has a pay-as-you-go tax system, meaning you pay tax as you earn money. This is generally accomplished by withholding money from your paycheck for both federal and state tax obligations. State withholding rules vary by state and may require a state-specific form or follow federal information, while federal withholding rules are consistent throughout the U.S.

What is withholding tax?

Put simply, if you're an employee, your employer withholds federal income taxes and your share of Social Security and Medicare taxes from your paycheck and sends your withholdings to the IRS and your state tax authority in your name.

Federal income tax withholding on the W-4

Your employer will use information you provided on your IRS Form W-4 to determine how much to withhold in income taxes. The amount of your taxable income and how frequently you are paid also play a part in how much federal income tax withholding (FITW) and state income tax withholding (SITW) to withhold from each paycheck.

How to calculate federal income tax withholdings

If you earn more than usual during a pay period—such as receiving a bonus or working overtime—FITW and SITW will increase. If you earn less—by working fewer hours or increasing contributions to your retirement savings—FITW and SITW will decrease. It’s advisable to have sufficient FITW and SITW during the year to cover your expected income tax bills.

What does Fed Tax, FT or FWT mean on your paycheck?

Federal income tax might be abbreviated as Fed Tax, FT, FWT or other ways on your paystub. Withholdings are the amount that you put aside for your income taxes. Your employer sends the money to the IRS.

This means you’ll get a credit for this amount to apply to any taxes you owe. Or, if you withheld too much, you’ll get the extra back as a tax refund.

How will having multiple jobs affect the W-4?

Tax rates increase as income rises, regardless of the number of jobs. Withholding calculations are based on total income, so when you have multiple jobs, or a joint return where both you and your spouse work, you need to indicate that on your Form W-4. This helps employers estimate withholding based on combined income.

State withholding tax

As mentioned above, SITW can vary, depending on where you live and work. If your state has an income tax, you will probably have state income taxes withheld from your paycheck. Your employer will use available withholding information and your income to figure out how much to withhold.

If you owe taxes to more than one state (for instance, if you work in a different state from your resident state), you may want to ask that your employer withhold taxes for more than one state or consider making estimated payments.

You can reach out to your Jackson Hewitt Tax Pro about any questions that may come up about complicated multi-state situations to avoid errors or a larger-than-expected tax bill when you file your federal and state returns.

While you will likely have state tax withholdings on your paycheck, it depends on where you live. In fact, based on your location, you might:

• Live and work in a no-income-tax state and have no withholding.
• Have state withholding for more than one state—the state you live in and the state(s) you work in, or the states your work in, but not your home state.
• Have local withholding for your city or town.

How much is federal and state tax?

Federal income tax rates generally range from 10% to 37%. The U.S. uses a progressive tax system where portions of income are taxed at different rates. These tax brackets are adjusted each year to account for inflation. This can help prevent a taxpayer from paying higher taxes as the cost-of-living increases.

Your state and local taxes vary by where you work and live. Always work with a Tax Pro to figure out what your tax rate is.

When should you think about changing your withholding?

The IRS recommends reviewing your withholding:

• Periodically, especially early in the year
• When tax law changes and
• When you have major life changes such as marriage, divorce, or changes in income.

Why would I need to fill out a W-4?

As an employee, you cannot control your social security and Medicare tax deduction certain state required contributions such as family leave and disability funds. However, you can influence how much federal income tax is withheld from each paycheck by completing your Form W-4. This form helps you estimate your annual income, deduct dependent related benefits, and request any additional dollar amounts to be withheld.

The tax withheld is based on your filing status, how often your employer pays you, the expected income from the job, and your other income and deductions. While a new job is the most common reason for filling out a Form W-4, the following situations are also likely to generate the need to submit a new W-4 at other times during your time with an employer:

• Marriage and divorce
• Having children
• Working multiple jobs
• Picking up a side hustle, or planning a transition to freelancing or becoming self-employed
• Major change in income
• Becoming a homeowner, or other situation resulting in increased deductions

How do I fill out a W-4 Form?

The W-4 form was updated due to tax reform and the elimination of personal and dependent exemptions. The withholding tables are now based on dollar amounts relative to filing status, income and tax credits.

If your tax situation is simple, you may only need to provide your basic personal information and sign the form, but completing additional steps may improve withholding accuracy depending on your income, dependents, or other adjustments. Your withholding will be based on your standard deduction and tax rate with no additional adjustments. If your tax situation is more complex, you need to complete Steps 2-5.

First, you need to complete the multiple jobs worksheet in Step 2 if it applies to you. In Step 3, enter the number of dependents if your annual income is expected to be less than $200,000 ($400,000 if married filing jointly). In Step 5, enter your expected deductions, other income aside from your job, and additional voluntary withholding.

Are there variations of W-4 Forms?

Yes. While only a Form W-4 can be given to employers, there are other forms in this series: W-4P for retirement income and W-4V for governmental payments like Social Security benefits and unemployment. Withholding is voluntary for these types of income, but recommended since they are subject to income tax.

Additionally, there is a state W-4 equivalent form you should not overlook if you live in a state with income tax. For instance, New York residents must fill out an IT-2104 which has the same purpose as a Form W-4, except it's for state and city taxes. If you move to or leave the city but have stayed within the state, that could force you to change your state and local withholding, but your federal tax situation usually won’t change. If you only want to change one type of withholding, like state taxes, you do not need to file a new Federal Form W-4. The same is true of wanting to leave your state withholding as-is, you don't need to file a new state form and just need to submit a new Federal Form W-4.

Where do I get a W-4 Form?

You can download the current Form W-4 from the official IRS website or obtain one from your employer or payroll provider.

Questions? We are here to help you navigate the complexities of federal and state tax withholdings and how the most recent W-4 changes may affect you and your family. You can work with Jackson Hewitt Tax Pro to decide what the right next steps may be for your tax situation.

About the Author

Mark Steber is Senior Vice President and Chief Tax Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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