W-4 Updates
Here is information you can give to your employees to help them avoid this same surprise this next tax year.
A W-4 is a document used by employers in the United States to determine the amount of federal income tax to withhold from an employee’s check.
One of the most significant changes to the new W-4 form is the elimination of allowances. Previously, employees could claim allowances based on their personal situation, which would then be used to determine the amount of federal income tax to withhold from their paycheck. The new W-4 form instead uses a five-step process that takes into account the employee’s income, deductions, credits, and other factors to determine the appropriate withholding amount.
The impact of the updated W-4 form on a multi-job person or couple can be significant. In the past, these individuals may have claimed more allowances on their W-4 forms in order to avoid having too much tax withheld from their paychecks. With the elimination of allowances, these individuals may find that they need to adjust their withholding amounts more carefully to avoid owing taxes at the end of the year.
Additionally, the new W-4 updated form includes a checkbox for employees who have multiple jobs or a spouse who works. The box, officially titled “Multiple Jobs Worksheet,” is used to adjust the employee’s withholding based on their total income from all jobs or their combined income with their working spouse. Checking the box in line 2 indicated to the employer that the employee wants to use the worksheet to determine the appropriate amount of tax to be withheld.
The worksheet itself takes into account factors such as the employee’s total income from all jobs, the amount of tax already withheld, and any deductions or credits that the employee is eligible for. By completing the worksheet, the employee can calculate a more accurate withholding amount that takes into account all of their sources of income.
Without checking the box in line 2 and completing the worksheet, an employee with more than one job or a working spouse may find that too little tax is being withheld from their paychecks, leading to a tax bill or penalty at the end of the year.
Checking the box and completing the worksheet can help to ensure that the correct amount of tax is withheld from each paycheck, reducing the likelihood of a tax bill or refund at the end of the year.
- Identify what current form is being used by your payroll department. Regardless, your employees should review their federal withholdings to make sure it should be enough.
- If employees want to update their withholdings, determine from your payroll department the best way for them to get an updated W4 completed.
- For multi-job persons or couples, the new form may require more careful consideration to ensure that the correct amount of tax is being withheld from each paycheck. Line 2 on the form should be reviewed. Remember, without checking the box in line 2 and completing the worksheet, an employee with more than one job or a working spouse may find that too little tax is being withheld from their paychecks, leading to a tax bill or penalty at the end of the year.
