Money Minute: FAQs about IRS form W-4

Posted by Mamie Wheaton, CFP® on 2/17/21 2:37 PM
Mamie Wheaton, CFP®

We sat down with Mamie Wheaton a CERTIFIED FINANCIAL PLANNER™️ with LearnLux to talk all about W-4s and common questions we get around the form.

Mamie will dive into to some key facts to know about the new form and how to navigate it, including:

  • What is a W-4?
  • When do I fill out a W-4? and, do I have to fill out a new form?
  • Why is there a new W-4 form, and how is it different from the old one?
  • Is the new W-4 harder to fill out?

Click below to watch the video, or read on for the full transcript below.

 

 

Hi, I'm Mamie a CERTIFIED FINANCIAL PLANNER™️ with LearnLux and today we are going to talk all about W-4s and common questions we get around the form.

Question one. What is a W-4?

It is the employees withholding certificate form. It is filled out by the employee and it is used by the employer so they can withhold the correct amount of federal income tax from your pay.

 

Question two. When do I  fill out a W-4? And do I have to fill out a new form?

If you were employed with the same employer before 2020, you do not need to complete a new form as long as you are happy with your current withholdings. You should fill out a new form if you generally owe a lot of money, or if you receive a large refund when you complete your taxes at tax time.

You will need to fill out a new W-4 if you get a new job, you get married or divorced, you have a baby, or if you start earning additional income at any time during the year. If you fill out a new w four and you do have multiple employers, you will need to fill out a W-4 for all of those employers.

 

Question three. Why is there a new W-4 form, and how is it different from the old one?

The biggest change is that employers no longer claim an allowance. An allowances an exemption from paying a certain amount of federal income tax. Previously, when you would claim an allowance, you were telling the government that you qualified not to pay that certain amount of federal income tax. Instead of claiming allowances, you will now answer some questions to help your employer figure out how much federal tax to withhold.

 

Question four. Is the new W-4 harder to fill out?

Well, it definitely looks a lot more difficult than it is. This form has five steps. So everyone will fill out step one, which is personal information and step five, signature page. If you only fill out step one and step five, your withholding will be based on the standard deduction for your specific filing status; single, married, filing separately, married, filing jointly, or head of household. Again, step one is personal information and tax filing status. Step two is filled out if you have more than one job or a spouse that works. Step three is filled out if you have qualifying dependents, in most cases, these will be children, but there are exceptions. And step four is optional, but it is for dividend interest or someone who makes itemized deductions at tax time.

Additionally, if you are someone that likes a bigger refund, you can opt to have more money withheld from your paycheck in step four. And again, step five is the signature page where you will sign and date. 

That's all there is to the form. It is very important to fill out this form as correctly as possible. And if you have additional questions, please schedule an appointment with a LearnLux financial planner, and we can walk you through the form in more detail.

Thanks for joining us for this LearnLux Money Minute.

Tags: for employees, money minute

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