Fortunately, the W-4 form has a section where you can provide information about additional jobs and working spouses so that your withholding can be adjusted accordingly. Step 2 of the form actually lists three different options you can choose from to make the necessary adjustments.
Also note that the IRS recommends completing a W-4 for all your jobs to get the most accurate withholding. By accurate, they mean having total withholding as close to your expected tax liability as possible. The W-4 form makes it easy to adjust your withholding to account for certain tax credits and deductions. There are clear lines on the W-4 form to add these amounts — you can't miss them. Including credits and deductions on the form will decrease the amount of tax withheld, which in turn increases the amount of your paycheck and reduces any refund you may get when you file your tax return.
Workers can factor in the child tax credit and the credit for other dependents in Step 3 of the form. You can also include estimates for other tax credits in Step 3, such as education tax credits or the foreign tax credit. For deductions, it's important to note that you should only enter deductions other than the basic standard deduction on Line 4 b.
So, you can include itemized deductions on this line. If you take the standard deduction, you can also include other deductions, such as those for student loan interest and IRAs. However, do not include the standard deduction amount itself. It could be "a source of error if folks just put in their full amount," warns Isberg. If you have multiple jobs or a working spouse, complete Step 3 and Line 4 b on only one W-4 form. To get the most accurate withholding, it should be the form for the highest paying job.
You'll also want to use this tool if you expect to work only part of the year, have dividend income or capital gains, are subject to additional taxes e. The IRS tool is also a good option if you have privacy concerns — for example, if you don't want your boss to know you're working two jobs or have other sources of income. The tool will spit out an amount to report as "extra withholding" on Line 4 c for these things, and your employer won't have a clue what it's for.
The tool doesn't ask you to provide sensitive information such as your name, Social Security number, address or bank account numbers, either. And the IRS doesn't save or record the information you enter in the tool. You'll want a few things by your side before you start using the tool — you'll need them as a source of information.
For example, have your most recent income tax return handy. You'll also need your most recent pay stub your spouse's, too, if you're married. Collect information for other sources of income as well, such as invoices, statements and forms. If you receive taxable income that isn't from wages — like interest, dividends or distributions from a traditional IRA — you can have your employer withhold tax from your paycheck to cover the extra taxes.
Just put the estimated total amount of this income for the year on Line 4 a of your W-4 form and your employer will calculate the proper withholding amount for each pay period.
In most cases, you won't have to submit estimated tax payments for this income. Don't include income from a side gig on Line 4 a. Keep reading for information on how to get your boss to withhold taxes from your regular paycheck for self-employment income. If you have a side job as an independent contractor i. This would be instead of making estimated tax payments for your second job. You can also pay self-employment taxes through withholding from your regular-job wages.
Consider using Form W-4 to reduce your withholding. And here are some steps you might take toward a specific outcome:. If you want more taxes taken out of your paychecks, perhaps leading to a tax refund when you file your annual return, here's how you might adjust your W Add an extra amount to withhold on line 4 c. If you want less in taxes taken out of your paychecks, perhaps leading to having to pay a tax bill when you file your annual return, here's how you might adjust your W Reduce the number on line 4 a or 4 c.
You indicate the correct tax-filing status. If you file as head of household and haven't updated your W-4 for a few years, for example, you may want to consider filling out the W-4 if you want the amount of taxes withheld from your pay to more accurately align with your tax liability.
Here's how to choose the right filing status. Your W-4 reflects you current family situation. If you had a baby or had a teenager turn 18 this year, your tax situation is changing and you may want to update your W You accurately estimate your other sources of income. Capital gains, interest on investments, rental properties and freelancing are just some of the many other sources of non-job income that might be taxable and worth updating on line 4 a of your W You accurately estimate your deductions.
The W-4 assumes you're taking the standard deduction when you file your tax return. If you plan to itemize presumably because itemizing will cut your taxes more than the standard deduction will , you'll want to estimate those extra deductions and change what's on line 4 b. Need more help? There are worksheets in the Form W-4 instructions to help you estimate certain tax deductions you might have coming.
You take advantage of the line for extra withholding. If you want to have a specific number of extra dollars withheld from each check for taxes, you can put that on line 4 c. Social Security and Medicare taxes will still come out of your check, though. Generally, the only way you can be exempt from withholding is if two things are true:. You got a refund of all your federal income tax withheld last year because you had no tax liability, and.
You expect the same thing to happen this year. You still need to complete steps 1 and 5. You can change your W-4 at any time, but if any of these things happen to you during the year you might especially want to update your W-4 so your withholdings reflect your tax life:.
You have a kid. You buy a house. You take a pay cut or get a big raise. You have a lot of dividend income. You or your spouse freelance on the side. Tinkering is OK. If one spouse earns considerably more money than the other, then too much tax may be withheld.
Step 3 takes into consideration tax credits you get when you claim dependents. Step 4 accounts for deductions and unearned income, such as from interest, dividends and Social Security. A deductions worksheet for Step 4 b on the form factors in itemized deductions, including mortgage interest, charitable contributions, medical expenses and state and local taxes. If you are taking the standard deduction, you can add such deductions as student loan interest and deductible IRA contributions on the worksheet.
However, do not add the actual standard deduction amount to the total as this will result in an error. This exercise will need to be repeated each year, as the exemption status is good for one year only. How We Make Money. Barbara Whelehan. Written by. Barbara Whelehan is a contributing writer for Bankrate. Barbara writes about a range of subjects, including homebuying, real estate, retirement, taxes and banking.
Edited By Lance Davis. Edited by. Lance Davis. Lance Davis is the senior editorial director for Bankrate. Lance leads a team responsible for creating educational content that guides people through the pivotal steps in their …. Reviewed By Malik S. Reviewed by. Malik S. Share this page. Key Principles We value your trust. Read more From Barbara.
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