Understanding Form W4

If you’ve worked a traditional job in your life, then you’ve probably filled out the very common IRS form known as a W-4. However, if you’re like many taxpayers, you may not understand exactly what this form is or its power. But, it’s vital to do so in order to use it to your full advantage.  

The Basics  

A W-4 Form is filled out by you, the employee. On this form, you provide your employer with certain key information about you. And, based on this information and on tax laws, your employer then determines how much to withhold from your pay.  

Of course, you do have some power. By legally changing various aspects of the information you list on your W-4 Form, you can also control how much is withheld and how it affects you. Withhold too much, and you’ll get a refund come tax time. Don’t withhold enough, however, and you could face penalties, high tax bills, and other undesirable situations.  

The Power of Change  

If you have a legitimate job, you undoubtedly filled out a W-4 Form when you first started working as an employee. However, if you’re like many people, you may have been so happy to have the position or so uninformed about tax laws that you didn’t pay much attention to what you marked on this form. If that’s the case, then there’s no better time to go back and make some changes, preferably with the help of a tax professional. This is especially important if you find that you’ve been paying too much in taxes lately and would like to see a change.

In fact, even if you did fill out everything correctly and carefully when you started your position, it’s a good idea to review your W-4 Form on a regular basis, particularly when you go through major changes that could affect your tax standing. Common changes of this type include things like:

●       Having a baby

●       Adopting a baby or child

●       Getting married

●       Getting divorced

●       Taking out a retirement savings plan

●       Adding or losing dependents

●       Death of a family member

●       Buying property

●       Selling property

Need to Make Adjustments?

If it’s been awhile since you’ve made adjustments to your W-4, if you’ve experienced a major life change, or if you just want to ensure you’ve filled out your form in a way that benefits you as much as possible, speak with a tax professional and then your employer.

WIth the right help and advice, you could see a big change in how much you pay or get back each tax season.