How to fill out a W-4 form in 2023

What is a W-4?

The W-4 form, also known as the Employee’s Withholding Certificate, is an IRS form used by employers in the U.S. to determine how much federal income tax should be withheld from an employee's paycheck. The form is used to report an employee's withholding allowances, which are based on factors such as the employee's filing status, number of dependents and additional income.

The W-4 form underwent significant changes for the 2020 tax year. “Exemptions were no longer utilized. Instead, the new post-2020 W-4 asks about filing status, other jobs, and credits you may be entitled to claim such as Child Tax Credit. To me, as a tax professional, it is almost a basic mini-tax return,” said Nicole Rosen, enrolled agent from Boundless Advisors.

“This is both good and bad. It should make withholding more accurate as it will more closely resemble a tax return, but it can also cause many people frustrations. They may be used to receiving a large refund, but the new W-4 means smaller refunds or potentially no refund.”

It's important to note that the W-4 only pertains to federal income tax withholding and does not address state or local taxes.

» MORE: The tax benefits of owning a home: must-know deductions and secrets

How to fill out a W-4 form

When filling out a new W-4 form, only steps one and five are necessary. Steps two, three and four are to only be filled out if they apply. Here’s how to fill out the latest form:

1. Provide your personal information: Start by filling in your name, address and Social Security number in the spaces provided.
2. Choose your filing status: The W-4 form provides several options for your filing status, such as single, married filing jointly or head of household. Choose the status that best applies to your situation.
3. Claim your allowances: The new W-4 form doesn't use withholding allowances, but instead requires you to enter your dependents, tax credits and other adjustments. These adjustments can include items like deductions, additional income and other tax credits.
4. If you have multiple jobs: If you have more than one job or work in a two-income household, you can use the IRS online estimator or the worksheet provided on the W-4 form to calculate your withholding amount more accurately.
5. Sign and date the form: Once you've filled out the form, sign and date it to certify the information you provided is accurate.

If your financial or personal situation changes, like if you get married, have a child or your child is no longer considered a dependent, you should update your W-4 form accordingly. By filling out the W-4 form accurately, you can ensure that the right amount of federal income tax is withheld from your paycheck.

» MORE: How to file your taxes for free

Overcoming common W-4 problems

The two most common issues that occur with filling out a W-4 are that you owe the IRS taxes at the end of the year or you get a substantial refund. Both are not ideal.

Owing the IRS at tax time can be strenuous on your finances and require tax relief help. While a large refund feels like a bonus check at the beginning of the year, it means that you have been lending the IRS your money for free and missing out on larger paychecks throughout the year.

To ensure you don’t owe taxes at the end of the year:

• Reduce the number of dependents
• Include extra amount you want to withhold on line 4(c)

To avoid a large refund and receive bigger paychecks:

• Increase the number of dependents
• Decrease or eliminate extra income withheld on lines 4(a) or 4(c)
• Increase your deduction amount on line 4(b)

The number of dependents you claim does not have to match how many individuals are in your family or care. You can adjust your dependent number to ensure you get a refund closer to $0.

Bottom line

Filing a W-4 form with your employer is an important step to ensure the correct amount of federal income tax is withheld from your paycheck. Regularly review and update your W-4 form if your circumstances change. If you are concerned about owing taxes at the end of the year, consider contacting a tax relief company.