Learn to navigate IRS Form W-4, focusing on handling multiple jobs, claiming dependents, adjusting deductions and other income, and utilizing the IRS Tax Estimator tool for accurate tax withholding.
W4 Tax Withholding Steps 2 to 4 Explained
W4 Tax Withholding Steps 2 to 4
If you watched our other introduction video to the W-4, How to Fill Out the W-4, you already understand the W-4 and filled out the top of the form. Now, let’s take a look in more detail at steps 2, 3, and 4.
Step 2
Step 2 is about multiple jobs or having a spouse who works. This step is designed to help you and your employer determine the correct amount of tax to withhold from your paycheck. It’s important to get this step right because you want to avoid owing a big chunk of money to the IRS at the end of the year, or conversely, lending Uncle Sam your hard-earned money interest-free.
The options available include: a) which here says Reserved for future use, but used to say using the IRS’s Tax Withholding Estimator tool, b) use the Multiple Jobs Worksheet on page 3 and enter the result in Step 4(c) or c) check the box if there are only two jobs in total. The online estimator is still probably the most accurate option, and we highly recommend it.
The IRS Tax Withholding Estimator is an online tool that can provide you with the most accurate withholding amount based on your specific circumstances. It takes into account your income, dependents, eligible tax credits, and other factors. This tool is updated every year, and it’s the best way to make sure you’re not over or underpaying your taxes.
The IRS Tax Estimator tool is a valuable online resource provided by the IRS to help you accurately fill out your Form W-4. This tool can be a game-changer when it comes to financial planning and avoiding any unwelcome surprises during tax season.
So, how do you use this tool? It’s a pretty straightforward process.
1. Go to the IRS website and find the Tax Withholding Estimator. We will include the link in the video description. It’s completely free to use.
2. Once there, you’ll find that the tool asks a series of questions about your income, filing status, dependents, and anticipated deductions and credits. It’s a good idea to have your most recent pay stubs and most recent income tax return handy to help answer these questions accurately.
3. After you’ve input all your information, the tool will estimate your tax liability for the year and suggest how to fill out your Form W-4 to have the correct amount of tax withheld.
Please note that the tool is only as accurate as the information you provide, so be as precise and thorough as possible.
Now, remember, the IRS Tax Estimator tool is not a replacement for professional tax advice. It is a starting point, a tool in your financial toolbox that can help you better manage your paycheck and your withholding. But each person’s tax situation is unique, and you should always consult with a tax professional if you have questions or concerns.
Step 3
Next, we have Step 3, where you claim your dependents. If you’re not sure who qualifies as a dependent, the IRS has a tool called the “Interactive Tax Assistant” that can help you.
Step 4
Step 4 is optional, but it helps further adjust your withholding. It consists of three parts: 4(a), 4(b), and 4(c).
4(a) is where you can input other income not from jobs, like interest, dividends, and retirement income. This isn’t where you put income from other jobs – that was Step 2.
4(b) is for deductions. If you plan to claim deductions other than the standard deduction on your tax return, you can enter them here. This may include items like student loan interest, mortgage interest, or charitable contributions.
Finally, 4(c) is extra withholding. This is where you put any additional tax you want withheld from each paycheck. This is where the result from the Multiple Jobs Worksheet would go if you used that instead of the online estimator.
Completing the Form W-4 can seem confusing, but taking it step by step can help simplify the process. Remember, your aim is to get your withholding as accurate as possible. It’s not about getting a big refund; it’s about paying the right amount of tax throughout the year. One final word of advice: If you go through major life changes, like getting married, having a child, or changing jobs, it’s a good idea to revisit your W-4. These changes can have a big impact on your tax situation.
Resources
- IRS Form W-4 – Employee’s Withholding Certificate and Instructions
This material has been prepared for educational and informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or investment advice.
