We’re a little over halfway through 2018, the first tax year affected by the Tax Cuts and Jobs Act. Earlier this year, we recommended doing a “Paycheck Check-up” and making any necessary adjustments to your Form W-4 (Employee’s Withholding Allowance Certificate) to avoid withholding too little Federal tax from each paycheck, which could lead to an unwelcome tax bill or penalties in April 2019. All that requires is updating the Form W-4 on file with your employer.
The IRS provides an online Withholding Calculator to help you determine the right type of withholding for your situation. But even with this calculator, completing a Form W-4 can be confusing. Let’s break it down:
Fields 1 through 4
These are straightforward, requesting your name, Social Security number, address, marital/filing status, and whether or not your name matches your Social Security Card.
Fields 5 and 6
This is where it can become confusing. Field 5 requests the “total number of allowances you’re claiming.” Calculate the number of allowances using the worksheets provided on the Form W-4. Field 6 asks how much, if any, additional funds you would like withheld from each paycheck. This is where the online Withholding Calculator is helpful.
In the event you meet both of the outlined conditions for exemption, indicate “Exempt” in this field.
Fields 8 through 10
These fields are to be completed by your employer.
You may adjust your withholding amounts via an updated Form W-4 as often as necessary for your situation. Outside of changes in your income or tax law, you will also need to complete an updated Form W-4 with these life events:
- Change of address (especially if you move to a new town/township/city/state)
- Change in marital status/marital filing status
- Name change
If you have any questions, we’re here to help. Contact us online or call 215-723-4881.