Starting a new job can be extremely exciting especially when you start thinking about your first check. Most employers will ask you to complete a W-4 so they know how much money to withhold from your pay. The form needs to be completed accurately because it affects whether you’ll get a refund or owe the IRS at tax time. Here’s a beginner’s guide to getting it right.
Find out if you’re exempt from withholding
Not everyone is required to pay taxes. You can be exempt from withholding if you received a refund of all the federal income tax withheld last year because you had no tax liability and you expect history to repeat itself again next year. For 2019, you aren’t allowed to claim an exemption if you’re single and earn more than $12,200. This stipulation basically disqualifies most full-time workers.
Complete the worksheets
Best advice for filling out your W-4 is to use the worksheets that are attached. The personal allowances worksheet is for everyone. The more allowances you claim, the less money is taken out of your paycheck. Don’t try to be slick and claim a bunch of allowances to keep your cash because your plan will backfire on you. If too little taxes are withheld, you’ll owe the IRS when you file your tax return. Contrary to popular belief, getting a big tax refund isn’t a great idea either. It means you gave the government an interest-free loan and now you’re getting your own money back.
The next worksheet is for deductions, adjustments, and additional income. This is only for taxpayers who plan to itemize, claim certain adjustments to income or have a large amount of nonwage income that isn’t subject to withholding. Finally, you have the two-earners/multiple jobs worksheet. As the name implies, it’s for people who work more than one job or cases where you’re married and both spouses work.
Transfer the information to your W-4
Once the worksheets are out of the way, you can just transfer the information to your W-4 and submit the form to your employer. Each time you get paid, the money that’s withheld will be sent to the IRS on your behalf. By January 31st, you’ll receive a W-2 from your employer reflecting your earnings and taxes paid for the prior year. This information will be used to prepare your tax return which you can DIY using a tax program like ezTaxReturn.com. Pre-register now and you won’t have to pay full price when you file in 2020.
Update your W-4 periodically
No one’s life remains the same forever which means you’re going to need to adjust your withholding along the way. Ideally, you want to complete a new W-4 at the beginning of every year and whenever your financial situation changes. You can find a copy of the form on the IRS website.