At the beginning of 2020, the Internal Revenue Service (IRS) released an updated version of Form W-4, the tax withholding form. Rather than using the allowances system, the new form calculates withholding based on information about a taxpayer’s current financial situation. A recent article for Business Insider offers guidance on when and how to complete the new form.
When should I fill out the new W-4?
Just because there is a new version of Form W-4 does not mean you need to complete it. As long as there have been no changes to your current tax circumstances, there is probably no need for you to adjust your withholdings. That said, it is generally recommended that taxpayers review their W-4 annually.
There are certain life changes that merit a mid-year update to your W-4. The article offers three common situations where it is recommended that you complete a new form, including if you:
- Get married,
- Have a new child
- Get an additional job
What do I need to know about filling out the new W-4?
Click here to take a look at the new Form W-4. You will see that it includes five steps:
- “Enter Your Personal Information” – You will need your name, social security number, current address, and filing status (single/married filing separately, married filing jointly, or head of household).
- “Multiple Jobs or Spouse Works” – This step applies to you if you work at more than one job or you and your spouse both work. It offers three options for determining the correct amount of withholdings:
- Visit irs.gov/W4App to use the IRS withholding calculator. This is the method that the IRS recommends for the highest accuracy.
- Refer to page 3 of the W-4, which offers a Multiple Jobs Worksheet.
- Simply check the box in this step, if there are only two jobs and they have similar pay.
- “Claim Dependents” – This step applies if you have qualifying children or other dependents. It helps you determine the credits for which you might be eligible.
- “Other Adjustments” (optional) – This step covers any additional income, the deductions you expect to claim (if you expect to itemize rather than take the standard deduction), and any additional tax you would like withheld (in order to receive a bigger refund the following year). Please note: while it is nice to get a big refund, withholding extra taxes is essentially giving the government an interest-free loan.
- “Sign Here” – In this step, you sign and date the document to certify that you have completed it honestly and accurately.
For more details, click here to read the article in full at Business Insider.