When you hire a new employee, you must collect a completed Form W-4, Employee’s Withholding Certificate. This is how you determine federal income tax withholding. At some point in the onboarding process, an employee may ask you how to fill out Form W-4.
Do you know the answer?
Read on to learn how to fill out a W-4 so you can be a resource to your employees.
What is Form W-4?
Form W-4 is a new employee form employees must fill out to determine federal income tax withholding.
Employees must fill out information like their Social Security number, filing status, and dependents.
After you receive a completed W-4 form, you can determine how much to withhold from the employee’s wages for federal income taxes.
When do employees fill out Form W-4?
Employees must fill out the W-4 when they start working somewhere.
If employees do not submit a Form W-4, you must withhold income tax from their wages as if they were single with zero allowances.
Can your employees change W-4 forms at any time? Typically yes, employees may update their W-4 forms during the year. For example, employees may want to change their federal income tax withholding if they get married. Or, they may simply want to adjust their tax withholdings.
However, employees cannot change their W-4 forms if you have received a lock-in letter from the IRS.
What responsibility does the employer have for the W-4?
You do not submit Form W-4 to the IRS. However, employers have several Form W-4 responsibilities.
Employers must:
- Distribute W-4 forms to new hires
- Update your payroll tax withholding based on the employee’s W-4 form
- Keep all W-4 forms in your records
- Submit Form W-4 to the IRS if they ask you to in a written notice
- Prevent employees from changing W-4 forms if the IRS sent you a lock-in letter
Make life a little simpler. Give employees the ability to update their W-4 forms in an online employee portal. Use payroll software with a free employee portal to get started.
How to fill out Form W-4
Are your employees at a loss over how to fill out the new W-4 form? Here’s a step-by-step guide on how to fill out Form W-4 so you can help your team.
Steps 1-5 are for your employee. The “Employers Only” section is your responsibility. Worksheets are optional and applicable to employees in certain situations.
- Step 1: Enter Personal Information
- Step 2: Multiple Jobs or Spouse Works
- Step 2(b): Multiple Jobs Worksheet
- Step 3: Claim Dependent and Other Credits
- Step 4 (optional): Other Adjustments
- Step 4(b): Deductions Worksheet
- Step 5: Sign Here
- Employers Only
Step 1: Enter Personal Information
The first section of the W-4, “Step 1: Enter Personal Information,” is mandatory. All employees must complete Step 1.
Your employee must enter their personal information and indicate their filing status in Step 1 of Form W-4.
Employees must enter the following in Step 1:
- First name and middle initial
- Last name
- Social Security number
- Address
- Filing status
- Single or Married filing separately
- Married filing jointly or Qualifying surviving spouse
- Head of household
You’ll need this personal information from your employee to accurately fill out Form W-2, Wage and Tax Statement.
Step 2: Multiple Jobs or Spouse Works
Employees must complete “Step 2: Multiple Jobs or Spouse Works” only if it applies to them.
Your employee should fill it out if they have more than one job at a time or are married filing jointly with a spouse who also works.
Does your employee work more than one job at a time? Or, is your employee married filing jointly with a spouse who also works?
If so, Step 2 applies to your employee, and the employee must do one of the following:
- Use the IRS estimator for accurate withholding,
- Use the Multiple Jobs Worksheet (Step 2(b)) and enter the result in Step 4(c) of Form W-4, OR
- Check this box if there are only two jobs total (and do the same on the Form W-4 for the other job)
Step 3: Claim Dependent and Other Credits
Employees must complete “Step 3: Claim Dependent and Other Credits” only if it applies to them.
Your employee should fill out Step 3 if they have qualifying children (children under age 17) or other dependents or want to claim additional credits. Only employees whose total income is $200,000 or less ($400,000 or less is married filing jointly) can claim the child tax credit and other dependent credits.
Will the employee’s total income be $200,000 or less ($400,000 or less if married filing jointly)? Does your employee have a qualifying child under age 17 or other dependents?
If the answer to both questions is yes, the employee will need to:
- Multiply the number of qualifying children under the age of 17 by $2,000 and enter the amount
- Multiply the number of other dependents by $500 and enter the amount
Finally, the employee will add the above amounts together for qualifying children, other dependents, and the amount of any other credits. The employee then enters the amount in Step 3.
Step 4 (optional): Other Adjustments
Employees can complete “Step 4 (optional): Other Adjustments” voluntarily.
Your employee should fill out this section if they want extra taxes withheld or if they want to reduce their withholding.
The employee can adjust their tax withholding with the following options:
- Other income (not from jobs): Employees can enter an amount if they want tax withheld for other income they expect to receive during the year.
- Deductions: Employees who expect to claim deductions other than the standard deduction can use the Deductions Worksheet to reduce their tax withholding.
- Extra withholding: Employees can request to have additional tax withheld each pay period.
Step 5: Sign Here
“Step 5: Sign Here” is mandatory. All employees must sign their W-4 form for it to be valid.
This section is reserved for the following two entries:
- Employee’s signature
- Date
Employers Only
Employees do not fill in this last section. It is reserved for employers only.
Employers must input the following information on each employee’s W-4 form:
- Your name and address
- The employee’s first date of employment
- Your Employer Identification Number (EIN)
Worksheets
Form W-4 includes two worksheets:
- Step 2(b): Multiple Jobs Worksheet
- Step 4(b): Deductions Worksheet
The employee only needs to complete one or both of these worksheets depending on their situation.
Employees complete the Multiple Jobs Worksheet only if they choose the option in Step 2(b) on Form W-4.
Employees complete the Deductions Worksheet only if they complete Step 4(b) because they expect to claim additional deductions and want to reduce withholding.
How to properly fill out a W-4 [example]
Let’s look at an example. Your new employee, Marsha, is completing Form W-4.
She is married and filing jointly with her husband, who also works. Marsha has two children under the age of 17.
Marsha needs to complete Step 2 because she is married filing jointly and her husband works. She also needs to complete Step 3 because she has two qualifying children.
Here is how Marsha’s Form W-4 would look:
Resources to help your team complete W-4s
Does your employee want a big refund at tax time? Or, would they rather earn more throughout the year?
The IRS has a Tax Withholding Estimator employees can use to estimate federal income tax withholding. Employees can use this tool to complete their W-4 forms and optimize their federal income tax withholding.
Your employees can use this tool to:
- Estimate withholding
- Determine how withholding amounts impact refunds, take-home pay, or taxes due
- Choose a withholding amount that fits their needs
Make tax withholding a snap with Patriot’s online payroll. You can let employees fill out W-4 forms in their online portal. After they sign their W-4 form, the changes will automatically update the payroll system. Get your free trial today!
This is not intended as legal advice; for more information, please click here.
