W-4 Form Exemptions.
One of the most important forms you fill out when you begin a new job is a W-4 form. If you aren’t required to fill one out – get worried. You may not be getting paid! Other times you may opt to complete a new W-4 form include a change in marital status, a new child or dependent or a significant pay increase or decrease.
What is the W-4 Form?
The W-4 form, provided by the Internal Revenue Service (IRS), is a form submitted to your employer so they know how much federal tax to withhold from your paycheck. The form, illustrated below, will document the number of exemptions you would like to claim.
What is an exemption?
An exemption affects the amount of taxes withheld from your paycheck. Generally, the more exemptions you claim, the less federal income tax your employer will withhold from your paycheck, creating a larger take-home paycheck. Sounds good, right? Claim a high number, get more money. Not really. There is a certain amount of tax that Uncle Sam expects you to pay each year, whether it comes out of your paycheck each pay period or is paid when you file your 1040 form by April 15th. When you’ve claimed fewer exemptions than you should (meaning the taxes taken out of your paycheck exceed your required liability), then money will be refunded to you after filing your taxes.
How many exemptions am I allowed to claim?
You can claim as many exemptions as you’d like. Claiming the most accurate number of exemptions will most likely result in the smallest amount of refund or taxes due.
Generally, if you are not claimed as a dependent on another taxpayer’s tax return, you claim one personal tax exemption. Married couples filing together may each receive an exemption. You may also claim an exemption for each child under 19 (or under 24 if they are a full-time student) who lives with you for more than half a year for whom you provide more than half of their support. The Personal Allowances Worksheet also provided as part of the W-4 form, guides you in estimating a reasonable number of exemptions.
The IRS also provides a withholding calculator on their website that allows you to measure your tax status at any time throughout the year. By plugging in some general information, you can compute whether you’re on track to owe to or receive money from the government. This helps to minimize any big surprises come tax filing season.
What if I have additional W-4 questions?
Both your accountant and financial advisor can assist with more complicated W-4 questions including providing advice on how many exemptions to claim. You should consult your payroll department with questions regarding filling out and submitting the form.
If you are a business owner and your company does not have a payroll department, you may want to consider talking to a Professional Employer Organization (PEO).
Call 630.928.0510 or fill out the form for FREE consultation.
Tandem HR, a Chicago area Certified PEO, providing payroll processing and payroll tax support to small and mid-sized companies. We also help clients save time and money while growing their business by taking on the administrative tasks associated with human resources, benefits, payroll, tax administration, regulatory compliance and risk management.
We’re not the only ones excited about our customizable, high-touch approach to human resources. Check out this powerful testimonial about the impact of our solutions.