Hi, I’m Greg Reed, Head of Tax at SmartBooks. Today, I want to break down Form W4, also known as the Employee’s Withholding Certificate. Though the form itself looks simple, with just seven lines, it includes several worksheets that make it tricky. If you fill it out wrong, your employer might withhold too much or too little tax. That can lead to penalties or unexpected tax bills. Let’s review.
Lines 1–4: Starting with the Basics
Lines 1 through 3 ask for personal information. Be sure to avW-4 oid typo errors here can create tax issues. Line 4 is relevant if you’ve recently changed your last name. If the name on your W-4 doesn’t match your Social Security card, your employer may withhold the highest tax rate.
Line 5: Withholding Allowances Explained
This is where the real work begins. You’ll need to refer to the Personal Allowances Worksheet. Each line on that worksheet affects your total withholding. Add the numbers from each section and enter the total on line H. That total usually goes on line 5 of your W-4.
Other Worksheets You Might Need
Two more worksheets can impact your W-4.
- Deductions, Adjustments, and Additional Income: Use this if you itemize deductions or have extra income like dividends or self-employment revenue.
- Multiple Jobs Worksheet: Complete this if you work two jobs or if both you and your spouse are employed. This worksheet can be confusing, so review it with a CPA if needed.
Lines 6 and 7: Additional Withholding and Exempt Status
Line 6 is for extra withholding amounts. Line 7 is for people with zero tax liability in the current and prior years. Most people leave it blank unless they’re exempt.
When to Update Your Form W-4
Update your Form W-4 if you:
- Start a new job
- Get married or divorced
- Have a child or gain a dependent
- Care for a relative
- Owe too much or get large refunds
Adjusting your W4 helps avoid surprises and puts more money in your pocket throughout the year.
Need Help with Form W4?
Filling out Form W-4 can feel overwhelming. If you’re unsure, reach out, we’re happy to help you get it right.
