Casey Moss Tax & Accounting

Filling Out the New W-4

It's not just you. Everyone is confused.

If you’ve started a job in the last year or had to fill out some new employment paperwork, you’ve probably noticed that the W-4 has changed a bit since the last time you filled it out. It may have brought back some memories of being a 16 year-old at your first job and having no idea what the hell you are looking at. This used to be simple. You used to know how to do this. What happened?

You’re not alone. I have taken quite a few phone calls in the last year or so about this, and I don’t anticipate it will stop any time soon. In case it’s been a while for you, the W-4 is what you fill out when you get a new job so that your employer can calculate your federal withholding correctly on your paychecks. This used to be a simple process, but it has become pretty complex since 2020.

What changed?

In earlier versions of the W-4, you used to hear terms like “single & 0” or “married & 1.” The single/married part represented your filing status on your tax return. That part hasn’t changed and is still listed on the new form. However, the “0” or “1” terms used to represent personal exemptions on your tax return. When the Tax Cuts and Jobs Act was passed in 2018, personal exemptions went away. They were replaced by a larger standard deduction and bigger child tax credits. That basically meant that the “allowances” or “exemptions” from the old W-4 were completely meaningless. To fix this, the IRS finally drafted a new W-4 form in 2020.

Here’s the problem: the new W-4 is a nightmare. To get the correct amount of withholding, you essentially have to fill out a miniature tax return and hand it to your employer. After you stumble through that, you also have to sign the form, stating that under penalties of perjury, you believe the form is true, correct, and complete. Maybe the IRS has a sense of humor after all.

How do I fill it out?

If your filing status is single or head of household and you only have one job, the form isn’t that bad. You’ll checkmark your filing status, fill out a dollar amount on line 3 based on the ages of any children you have, and then fill out any additional income/deduction information you have on your tax return. For most people, there isn’t much to fill out for additional income/deductions. However, for individuals with multiple sources of income, this part can be important to make sure enough withholding is paid in.

If you have multiple jobs (or are married and your spouse also works), the form gets more complicated. They lay out some options for you though. The first option is to use the withholding estimator at http://www.irs.gov/W4App. This is not a walk in the park, so put aside some time if you’re going to do this. The next option is to use the “multiple jobs worksheet,” which is overwhelming to say the least. The third (and preferred) option is to check a box stating that there are multiple jobs to be considered. After that, you should fill out a new W-4 for both jobs (one for you and one for your spouse, or one for both of your jobs if filing single). For the lower-paying job, check this box, sign it, and turn it in. The form instructs that this will provide more accurate withholding for tax returns with multiple jobs. For the higher-paying job, check the box and fill out dependent/additional income information before turning it in.

At the end of 2018, you may have heard the horror stories on the news about people having to pay thousands of dollars with their tax filings when they normally received large refunds. The reason for this was because their W-4’s were no longer compatible with the new tax law. That’s why the IRS had to come out with this complicated new withholding form. While this is a routine part of getting a new job or updating employee files, this form can have a massive impact on your tax situation. If you aren’t sure how to fill out the form or want to make sure you did it correctly, feel free to contact me. I can even prepare this form with your tax return this year so you have it for future reference.

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