The federal W4 form is a form that employees complete that lets their employer know how much federal income tax (FIT) to withhold from their pay.

You don’t have to be an expert on the form, but if you have employees, you should understand the basics. The goal of the form is to ensure that the amount of tax withheld equals the amount of tax the employee will owe. If an employee fills out the form incorrectly, it can result in them having too little tax withheld, causing them to owe when they file their income taxes. On the flip side, if they have too much tax withheld, they will receive a refund when they file their income taxes. (As a reminder, this form is for withholding federal income tax ONLY. If you have questions about other types of payroll taxes, please click on ‘previous’ below to read my blog from last week, ‘What are Payroll Taxes?’.)

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Here are step by step instructions for how to complete the form:

Step 1: Enter Personal Information.

This step is simple enough. The employee needs to enter their legal first and last name (as shown on their social security card), their social security number, complete address and filing status. Your filing status means when you file your income taxes (Form 1040), is your filing status a) single or married filing separately, b) married filing jointly or qualifying widow(er), or c) head of household? If you are filling out the form in 2022, you should check the box for how you plan on filing your 2022 income tax return.

Step 2: Multiple Jobs or Spouse Works.

This step is for if you have more than one job or if your filing status is married filing jointly and your spouse also works. By completing this section, you are including wages that you will be taxed on when you file your income tax return, so that more tax can be withheld throughout the year. This will reduce the chances of you having to owe when you file your income taxes.

Step 3: Claim Dependents.

If you will be claiming any dependents on your tax return, and you want the amount of taxes withheld to take that into account, you should complete this step. There are two types of dependents, children under 17 and ‘other dependents’, and each one has a different deduction amount. This step reduces the amount of tax that will be withheld.

Step 4: Other Adjustments.

This section allows you to enter additional information to increase or decrease your tax withholding. There is a section to enter other income (will increase your withholding), to enter deductions (will decrease your withholding), and extra withholding, line 4c. Everyone always misunderstands extra withholding. This is an additional amount that you want your employer to withhold. For example, if you fill out your W4 form and you end up having $25 withheld each payroll and you want $75 withheld each payroll, you would enter $50.00 on line 4c.

If you want to claim EXEMPT, meaning that you want no federal income tax withheld from your pay, write EXEMPT under line 4c.

Step 5: The employee signs and dates the form.

Items to Note:

  • The W4 form has 4 pages, and the employer is required to provide all 4 pages to the employee.

  • The employee only must return page 1, the actual W4 form.

  • There are 5 steps on the form, but the employee is only required to fill out steps 1 and 5.

  • If the employee claims EXEMPT, they must furnish a new W4 form each year to keep EXEMPT status.

  • Once the employee returns the form to the employer, the employer has 30 days to make the W4 changes.

  • The employer is required to keep W4 forms on file for 4 years after the last time it was used.

Many states also have their own W4 form so that employees can let their employers know how much state tax to withhold. Click here to see a list of states and be directed to their withholding form on their state website.