How to Fill Out Form W-4 in 2023

A step-by-step guide to help you fill out this revised document:

If you are switching jobs and haven't done it recently, you'll see that the W-4 form that every employee has to fill out in order to determine the amount of taxes that are withheld from each paycheck has changed. The Internal Revenue Service (IRS) says it has revised the form in order to increase its transparency and the accuracy of the payroll withholding system.

Luckily, if you're not changing jobs and have no reason to redo your W-4, you don't have to fill out a new one. Your employer can continue to use the one you have on file.

The current W-4 does not ask employees to indicate personal exemptions or dependency exemptions, which are no longer relevant. It does, however, ask how many dependents you can claim. It also asks whether you wish to increase or decrease your withholding amount based on certain factors like a second job or your eligibility for itemized deductions.

The current version of Form W-4 has been effective since December 2020.

KEY TAKEAWAYS

• Your entries on Form W-4, the Employee’s Withholding Certificate, determine how much tax your employer will deduct from your paycheck.
• The more accurately you fill it out, the less you will owe (or be owed) when you file your annual income taxes.
• The new W-4 form lets you adjust your withholding based on certain personal circumstances, such as a second job.

How Form W-4 Works

The W-4 form had a complete makeover in 2020 and now has five sections instead of seven to fill out.

The way that you fill out Form W-4, Employee’s Withholding Certificate, determines how much tax your employer will withhold from your paycheck. Your employer sends the money it withholds from your paycheck to the IRS, along with your name and?Social Security number.

Your withholding counts toward paying the annual income tax bill you calculate when you file your tax return for the year. That’s why a W-4 form asks for identifying information, such as your name, address, and Social Security number.

What Has Changed on Form W-4

The current version of the W-4 form eliminates the option to claim personal allowances. Previously, a W-4 came with a Personal Allowances Worksheet to help you figure out how many allowances to claim. The more allowances you claimed, the less an employer would withhold from your paycheck; the fewer allowances you claimed, the more your employer would withhold.

The current form asks you to record the number of dependents in your household. It also asks whether your circumstances warrant a larger or smaller amount of withholding. For the first time, it allows you to indicate whether you have income from a second job or expect to have deductions that you will itemize in your tax return.

The W-4 has five steps, including one that is optional.

Step 1: This is the usual personal information that identifies you and indicates whether you plan to file your taxes as a single person, a married person, or a head of household.

Step 2: This part is for people whose circumstances indicate that they should withhold more or less than the standard amount. A spouse's income, a second job, or freelance income are all factors that can be recorded here.

Step 3: This section is where you indicate the number of your children or other dependents.

Step 4: This optional section allows you to indicate other reasons to withhold more or less from your paycheck. Passive income from investments, for example, may increase your annual income and the amount of taxes you owe. Itemizing deductions may lower the amount of taxes you owe. These may be reasons to adjust your withholding on the W-4.

Step 5: Your signature.

You also have a good reason to revise your W-4 based on your recent tax returns, if you discovered that you owed a lot of money, or were owed a lot of money because you overpaid.

It is also a good idea to update your W-4 any time you experience a big life change—such as the birth of a child, a marriage or divorce, or a new freelance job on the side.