5 Tax Withholding Considerations

5 Things to Consider When Filling Out a New W-4

This article was last edited on 01/21/2020 and accounts for 2020 W-4 changes. Learn more about changes made to Form W-4.  

The goal when filling out your W-4 is to make sure you don’t owe anything to the IRS when you’re filing your taxes in April. If you’re filling out a new form because you’re starting a new job or your circumstances have changed, keep these things in mind.

1. Consider your last tax return

If you owed the IRS money last year, you might not have had enough federal income taxes withheld from your paychecks. On the other hand, if you received a large refund, you might have had too much withheld from your earnings.

Read also: 21 Smart & Fun(ish) Things to Do with Your Tax Refund

2. Think about your side-gigs

Besides your regular 9-to-5 job, you might also do work on the side as an independent contractor. Typically, this means you’ll receive a 1099-MISC form at the end of the year and won’t have taxes withheld from those additional payments. That might mean you need to make quarterly estimated tax payments, or you can ask your primary job to withhold extra income tax from your paycheck.

Read also: Should I Be an Employee or an Independent Contractor?

3. Review life changes

If you’ve had any life changes over the past year, they might affect your withholdings:

  • You took a second job. If you run a business from home or work a second part-time or full-time position, you might have moved up a tax bracket and need to adjust your W-4 to make sure enough taxes are being withheld.
  • Your spouse changed jobs. Your spouse’s position may also put you in a new tax bracket. If you’re filing jointly, sit down with your significant other to determine how much you each want to be withheld from your checks to account for your total combined income.
  • You got married or divorced. When you get married or divorced, your filing status will likely change, which means how much should be withheld from your paychecks will need to be updated.
  • You had or adopted a baby. Once you have a child, you’ll be able to claim the child tax credit on your W-4. This allows you to reduce your tax liability and, therefore, how much taxes are withheld from your paycheck.

4. Take your spouse’s income into account

If your spouse’s income is significant, you might want to consider checking “Single or Married filing separately” on your W-4. Doing this will make sure that you’re withholding enough taxes from your paycheck. However, the new W-4 allows you to determine how much extra to withhold based on both your and your spouse’s income.

5. Determine if you need to complete a worksheet

The updated W-4 has reduced the number of worksheets needed to complete the form accurately, but there are still two that you might choose to complete:

  1. Multiple Jobs Worksheet – Use this worksheet if you have multiple jobs or your spouse also works.
  2. Deductions Worksheet – Use this worksheet if you will itemize your deductions instead of claiming the standard deduction when you file your tax return.

If you’re worried that filling out the W-4 is complicated, the IRS has created a Tax Withholding Calculator that will help you fill out your form accurately.