How to fill out your W-4 form: a step-by-step guide

What is Form W-4?

The IRS designed the W-4 so that your employer could correctly calculate how much federal income tax to withhold from your paycheck. On the form, you indicate your filing status, either Single, Head of Household, or Married, Filing Jointly for your return. You also follow the rules for dependent credits such as Child Tax Credit or Credit of Other Dependents. 

Since most Americans prepay federal income taxes through paycheck withholding, getting the amount right is important.

• Withhold too much for taxes? You take home less than you should each month, and give the government an interest-free loan. Although any extra money withheld comes back to you as a refund, this won’t happen until after you file your taxes next year.
• Withhold too little for taxes? You take home more money each paycheck, but then get hit by a surprise tax bill when you file next April.

Who needs to fill out a new Form W-4

When you start a new job, you should fill out a new W-4 for your new employer. Otherwise, your employer will withhold taxes as though you are single and have no exemptions or other income.

If you are an existing employee, you likely already filled out a W-4. Whenever anything changes in your financial situation—marriage, having children, second jobs or side gigs, income changes—it might be worth filling out a new W-4. And if you haven’t filed a new W-4 since 2020, you may want to file out a new one—and make sure you are withholding the right amount for taxes.

The IRS generally does not get a copy of your W-4. This form is for your employer, to make sure you are withholding income correctly to pay your taxes.

Form W-4 was last updated in 2020

If you fill out a W-4 this year, you will see “2022” in the upper-right corner to reflect when you’re filling it out. But the form itself is new as of 2020, when the IRS greatly simplified the form to reflect recent tax changes.

The Tax Cuts and Jobs Act of 2017 reduced the total tax bill for many Americans, but the W-4 wasn’t immediately updated to reflect the 2017 changes to how taxes are calculated. As a result, many people didn’t withhold enough taxes from their wages. Even though they were paying less in total annual income taxes, these people ended up with a big tax bill when they filed in 2018. This shows just how important it is to update your W-4.

With this new W-4, the IRS removed personal exemptions and allowances, which were confusing. Instead, you now directly enter dollar amounts for dependents based on child tax credits.

How to fill out a W-4: 5 steps to withholding

The W-4 rolled is supposed to be simple. The current form no longer focuses on personal and dependent exemptions as they have been suspended through 2025 tax years.

Form W-4 takes you through 5 quick steps that gather the information needed to estimate more accurate withholding.

Step 1. Here you enter your personal information. This is also where you choose your filing status, such as Single, Head of Household, or Married, Filing Jointly.

Step 2. If you have a second job, or if you’re married and your spouse works, you can use the worksheets or the IRS calculator to determine the appropriate amount to enter. You can find the online calculator at www.irs.gov/W4app.

Step 3. This is a biggie. Here’s where the form guides you to enter the amount of child tax credit or credit for other dependents, if you have them.

In previous years, you just entered the number of dependents you had. Child tax credits weren’t considered in the withholding calculation.

Step 4. This is another big change that came about in 2020’s Form W-4 overhaul. The form now instructs you to enter income not subject to withholding, such as interest and dividend income.

Not sure how to fill this out? You may want to use last year’s taxes as your guide, or reach out to a Tax Pro who can help you get this right and avoid a surprise tax bill.

You can also use Step 4 to request withholding additional money to help cover taxes from other types of income, such as self-employment or side gigs.

Step 5. This step does not actually affect your tax calculation, but you need to sign your form so that your employer knows you completed it.

Common mistakes filling out a W-4

Remembering to regularly update your W-4 form is only half the battle. You need to make sure you do it correctly. While the IRS tried to simplify the form, its instructions still get confusing and often lead to a few common errors. The good news: if you’re aware of these potential mistakes, you can learn how to try and avoid them.

Filling out the W-4 together. This refers to not only married taxpayers filing jointly, but also taxpayers with multiple jobs. Add the information for each taxpayer and for each job. This will provide a W-4 printout for each taxpayer when filing jointly and allow the taxpayer(s) to complete a W-4 for each job.

Not including all other income. Remember to add up your retirement income distributions as well as your interest and dividends, cryptocurrency, rental income, and other investments. Many taxpayers forget the side gig and other small-business income when completing their W-4, which often results in taxes owed.

Not taking advantage of tax credits and deductions. Including your tax credits and deductions—other than the standard deduction—in your estimates will help to lower your withholding, provide a bigger paycheck and help you control your refund.

Remember this:

• Bigger Paychecks = Lower Withholding = Lower Refund
• Smaller Paychecks = Larger Withholding = Higher Refund

Filling out the new W-4 can get tricky, especially if you are married, filing jointly and both work, or you have dependents or a side gig. You might find yourself with a bigger tax bill than expected, or less money than you deserve every paycheck.

Finally, use the IRS online estimator. It makes completing your W-4 much easier and you can print out the final results, sign it, and return it to your company.

Confused when filling out your W-4? Book an appointment with your local Tax Pro to get peace of mind—and keep your money.

About the Author

Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.

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