W4 Form Explained

When you start a new job, your employer will have you fill out an employee's withholding allowance certificate, or Form W-4. The W-4 is how you employer knows how much income tax to withhold from your paycheck. It's based on the number of allowances you claim from the personal allowances worksheet portion of the W-4. In general, you may claim one allowance for yourself and one for each of your dependents.

Withholding Allowance

Withholding allowances are different for each employee. For example, a married man with three children can claim an allowance for himself, his spouse and one for each child for a total of five. Another married man with a working spouse and the same number of children might claim one less allowance to account for his wife's employment. The more allowances you have, the less money your employer withholds from your gross pay.

Deductions and Adjustment Worksheet

Deductions are popular during tax season since having some good ones will reduce your taxable income. On the W-4, you can take a standard deduction or itemize deductions. Itemizing is only worth your money if you have enough qualifying deductions. The W-4's deductions and adjustment worksheet can help you make that determination. Common qualifying deductions include mortgage interest payments, alimony payments and IRA contributions.

Multiple Jobs Worksheet

Having more than one job or a working spouse means you may have to use the two-earners/multiple jobs worksheet to make further withholding adjustments. The IRS recommends applying all allowances on the W-4 worksheet to the highest earner between spouses and zero allowances for the other.

Updating the W-4

There are no limits to how often you can update the W-4. If you get married, have a baby, or take on a dependent, get a new W-4 from your employer and make the appropriate changes to your withholding. Your employer will make the appropriate adjustments to your paycheck and notify the IRS of the change. Employers aren't perfect record keepers, so always keep a copy of every change in the W-4 for your own protection.

About the Author

Randolf Saint-Leger began his professional writing career as a junior research analyst. His writings have appeared in various online publications as well as "First Call," a leading news source for professional fund managers. Saint-Leger holds a Master of Business Administration in finance and international business from Pace University.