W-4 Form: is also known as the Employee’s Withholding Allowance Certificate or Employee’s Withholding Certificate. This form determines the amount of federal tax to be taken from the paycheck of an employee. The calculation depends on a number of factors, such as the filing status of employees and family size, which can vary every year. Therefore all the employees are advised to annually review and update their W-4 forms to make sure accurate withholding.
Even the W-2 Form or Wage and Tax Statement is also closely related to the W-4. The information provided on the W-4 is useful in calculating the withholding amounts throughout the year, which are then reflected in the W-2. This form will reflect the total annual earnings and the amount of tax withheld, which eventually help the employees file their tax returns accurately.
Who needs to fill out this W-4 Form?
The list of employees given below are required to fill out a W-4 form:-
New Hires :-
It is necessary for all the newly hired employees to submit their W-4 form while starting working. This form will help in determining the appropriate amount of tax to be taken from their paychecks. If any employee does not submit a W-4 form then in that case the taxes must be taken as if they are single and claiming zero dependents.
This default status will eventually result in higher tax withholding than the actual liability of the employees. If one wants to avoid this scenario, employees should complete and update their forms annually.
Employees Experiencing Significant Life Changes :-
All those existing employees who experience significant life changes also need to fill out a new W-4 form. These changes include:-
- Getting married
- Getting divorced
- Having a child
- Changing jobs
When an employee reports about any of these changes then they should be asked to fill out a new W-4 form in order to make sure that their tax withholding is updated annually and appropriately.
Employees Wanting to Adjust Tax Withholdings :-
Some employees who wants to adjust their tax withholding for various reasons, such as:-
- Earning more than expected from non-wage income
- Planning a major purchase, like a new home
All these kinds of employees can change their withholding by submitting a new W-4 that reflects their current situation.
Importance of Educating Employees
It’s important to make sure that your employees understand the importance of the W-4 form and the need to fill it out correctly. Many people may not realize that their tax withholding will eventually affect their take-home pay or whenever their circumstances change they need to update their W-4. Educating employees about the W-4 process can help them in eliminating errors, save time, and potentially avoid major issues.
Method to Fill out W-4 form for 2024
There are five sections in 2024 W-4 tax form for employees, but employees only need to complete sections 1, 2, 3, 4 (if applicable), and 5. Section 6 will be filled out by the employer.
- Firstly all the Employees need to fill in their name, address, Social Security number, and filing status.
- After this employees need to provide details about any additional jobs or a working spouse. The form provides three methods for entering this data to ensure accurate withholding.
- Employees who are earning less than $200,000 ($400,000 if filing jointly) can claim dependents. Each eligible child is recorded at $2,000, while other dependents are recorded at $500.
- In this section, employees have to enter their additional income resource (like self-employment income), other deductions, and any extra withholding amounts. If claiming exemption from withholding, they have to write “exempt” here.
- Now to validate the form the employee must sign it.
- In the end your employer will complete this section by adding the name of the organization and Employer Identification Number (EIN).
Recent Updates about W-4 Form 2024 Updates
Few minor updates have been included in the 2024 W-4 form which are given below:-
- For individuals and their spouses with self-employment income the form now references a new tax withholding estimator.
- For the 2024 Deductions Worksheet the IRS updated the amounts.
- One can get the mosg recent version of the W-4 can be found on the IRS website.
Previous W-4 Changes
The IRS made several changes to the W-4 form in 2023 which include:-
- The IRS had removed the references to the tax withholding estimator.
- Additional information was also provided to clarify who should use the checkbox for multiple jobs.
- The 2023 Deductions Worksheet was updated.
- The form was simplified with fewer lines to complete. Also the option to lower withholding by using personal allowances was removed.
Impact on Current Employees
It is not necessary for the current employees to complete a new form who already have a valid W-4 form on file due to the redesign. However it is the duty of the employers to inform their teams about the changes.
If it is not necessary for an employee to update their filing status or if any kind of adjustment is not needed then the existing W-4 data can still be used to calculate withholdings. In case the new form is required, the employee must complete the most recent version. Employers should also be aware of document retention requirements for W-4s and other essential forms to ensure compliance.
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