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Why completing a W-4 is so important and how.
The W-4 is a form that you complete "BeFore" you start work. It tells your employer how much in tax you need withheld or deducted from your Gross Income.
If you fill out the form incorrectly you will either:
Not having enough money withheld and you will end up needing to pay more money to the IRS before Mid-April of the next year.
Have too much withheld and you will feel "poor" all year long then get a huge refund from the IRS in Mid-April.
The W-4 form is easy for a person to fill out if you only have one job and no dependents.
Assumptions: Single, One job, No kids.
Step 1:
Print or type legal name on (a) and home address directly below your name
Write Social Security number on (b)
On (c), check the appropriate box to indicate marital status
Skip Steps 2, 3 & 4 (not married & no dependents)
Step 5:
Sign name and date the form before giving it to the employer
Your employer will determine the amount of tax to withhold from your paycheck.
Also, any changes in income (raises, promotions, gig-work), marital status, or dependents (children) will require you to complete a new W-4 (sometimes even in the middle of the year).
If you are working part of the year (summer job or a job after graduation), working a second job, or have a working spouse; the IRS provides an online Tax Withholding Estimator web-app to help with more complex employment situations.
IRS Tax Withholding Estimator: www.irs.gov/W4App
Results of Filing Taxes each year:
If your IRS-Return is more than $2,000 then adjust Step 4 (b) by adding a dependent.
If your IRS-Liability is more than $500 then add that amount divided by the number of paychecks you receive per year to Step 4 (c).
Be Brave! Eventually your life will mellow-out and you will be able to go a few years without needing to change your W-4. So, enjoy the chaos while you have it and make your taxes work for you!
Questions:
1. What are the two outcomes if you fill out your W-4 incorrectly?
2. What are at least three things that would require you to complete a new W-4 form?
3. If you had an IRS-Return of $2,400, in theory, how much money could you have had each month?
Resources:
PowerPoint: Paychecks and Tax Forms