Donna Bordeaux explains how to use IRS Form W-4 to adjust payroll withholding. Employees should submit a new W-4 rather than ask employers to change withholding manually. The form changed after 2020 when personal exemptions were removed, and key sections cover multiple jobs, dependents, and extra withholding for self-employed workers.
I've had several people recently ask about their payroll withholding or an employee has asked their employer about withholding on their checks being different than it was in in prior years. This often happens right after tax filing when people realize they either owed a lot of money or got a lot back and they want to adjust their withholdings. First off, as an employer, your job is to tell your employee to fill out a new W4. Do not try to do tax calculations for them or adjust their withholdings for them. They must be in charge of this themselves. If you screw it up, you could be on the hook for a balance due that they make to the irs. So don't jump in that pool. Ask the employee to fill out their new W4. Now, if you're in the boat of looking at your W4 and you're confused, there's a logical reason why in 2020, after the IRS had to eliminate the personal exemption from the the tax code based on the tax law that changed, they updated the W4. So the W4 no longer asks like how many allowances do you have in the same way that it did before when it really kind of related to people? Like how many kids do you have? How many people are filing on your return? Now there are a couple of different sections of the W4 that you need to be aware of if you want to make changes. First off, in step two of the W4, read those instructions very carefully. That's just asking if you or your spouse each have jobs and that's trying to figure out how the withholding should work. Should we assume that you both have the same salary ish of a job? But the more important part is looking at section 4. If you're self employed or if you'd like to have extra withholding withheld, you'll list just a flat amount there. You can also look at section three to determine how many dependents you have and try to adjust the withholdings. The easiest way I suggest is look at what your shortfall was or your overage. File a new W4 and look at the change from one pay stub to another. Multiply that out by the number of remaining weeks of the year and see how close you come. You may have to make a couple of iterations to get this just the way you want it. The IRS also has a calculator on its website that you can run some preliminary calculations with. Not sure how helpful it'll be, but you can give that a shot too.
I'm Donna Bordeaux from Calculated Moves. Please follow us on Facebook, Instagram and LinkedIn. Make sure you check out our blog and our website from the link below. Subscribe to our YouTube channel and hit the bell to be notified when we post. To contact me, email me@donnaalculatedmoves.com.
