How to Fill Out a W-4

When taxpayers notice smaller-than-expected refunds, it’s often due to an outdated Form W-4. Many people don’t realize that a W-4 needs to be updated whenever certain life changes occur, and failing to do so may leave you with too little tax withheld throughout the year. This can result in a smaller refund, or even a tax bill, come tax season. Since the 2020 changes to the W-4 form, and with updates for 2025, there is still some confusion about how to properly complete the form. This guide breaks down exactly how to fill out a W-4, including examples, common mistakes to avoid, and tips for optimizing your withholding.  

What is a W-4? 

A W-4, officially called the Employee’s Withholding Certificate, is an IRS tax form that tells your employer how much federal income tax to withhold from your paycheck. Employers are required to withhold taxes throughout the year, and the W-4 helps ensure the correct amount is withheld based on your personal situation. 

The W-4 affects your take-home pay, tax refund, and potential tax liability. Withholding too little can leave you with a tax bill and possible penalties. Withholding too much, meanwhile, effectively gives the government an interest-free loan that could have been used for savings, investments, or paying down debt. Factors influencing your withholding include your filing status, number of dependents, other income, deductions, and any additional withholding you choose. 

When Should I Fill Out a W-4? 

You should fill out a W-4 whenever you start a new job or your tax situation changes. It’s also a good idea to review it annually. 

Life changes that may require a W-4 update include marriage, divorce, birth or adoption of a child, the child turning 17, a significant raise, or a new side income. Even seemingly small changes, such as your spouse starting or stopping work, can affect your withholding. Submitting changes promptly is important because payroll systems typically take 1–2 pay periods to implement updates, and late adjustments can leave you to under- or over-withheld. 

How to Fill Out a W-4 

Step 1: Enter Your Personal Information 

Fill in your full name, address, Social Security number, and filing status (single, married filing jointly, or head of household). Filing status affects which tax credits and deductions apply to your situation. While you can stop after this step, completing the following steps provides a more accurate withholding and helps avoid surprises at tax time. If you have more than one job, or if both you and your spouse work, consider completing Steps 2 through 4 for a more accurate withholding.   

Step 2: Multiple Jobs or Spouse Works 

This section ensures proper withholding when there is more than one income in your household. You have three main options: 

1. Use the IRS Tax Withholding Estimator, an online tool that calculates the precise amount to withhold based on all income and deductions. 

2. Complete the Multiple Jobs Worksheet included with the W-4 form. 

3. Check the box if two jobs have similar pay, which automatically adjusts withholding. 

If one spouse earns significantly more than the other, it may be beneficial to only have the higher earner complete Steps 2-4(b). If you and your spouse earn about the same, you can both check the box in Step 2(c) to prevent under-withholding. For self-employed income or side gigs, you’ll need to keep in mind that W-4s do not cover self-employment tax. That said, you may want to consider adjusting Step 4(c) to withhold additional tax or make quarterly estimated tax payments to avoid underpayment penalties. 

Another common scenario to plan for is if you have multiple jobs. In this case, you could treat yourself like a two-income household to calculate your combined withholding. If both jobs earn the same amount, checking the box in 2(c) can simplify things. There are even some cases where you may want to omit the fact that you have a second job, in which case you can choose to withhold additional tax in Step 4(c) or make estimated tax payments. Clearly, this step can become complex and overwhelming. It could be helpful to consult a tax professional to ensure you are not withholding too much or too little. 

Step 3: Claim Dependents 

If your income is under $200,000 (single) or $400,000 (married filing jointly), you can claim child and dependent tax credits. Multiply the number of qualifying children under 17 by $2,200, multiply other dependents by $500, and enter the total on Step 3. Only one spouse should claim these credits to avoid under-withholding. 

Let’s look at an example. Two children under 17 = $4,000. One dependent parent = $500. Enter $4,500 on Step 3. This total tells your employer how much to reduce your withholding for tax credits, ensuring the correct amount of tax is withheld from each paycheck. 

You can choose not to claim dependents here to increase withholding, which may result in a larger refund. 

Step 4: Other Adjustments 

Step 4 allows fine-tuning based on other income, deductions, or extra withholding. Include interest, dividends, freelance income, or itemized deductions above the standard deduction. You can also specify extra withholding per paycheck if you anticipate tax liabilities from non-job income. 

Adjusting withholding strategically can help balance your paycheck and overall financial goals, such as investing in a 401(k), contributing to an HSA, or managing cash flow. It’s not just about refunds; it’s about controlling your money throughout the year. 

Step 5: Sign and Submit 

Sign and date the W-4, then submit it to your employer. Most payroll systems will implement changes within 1–2 pay periods. Keep a copy of your records and update the form anytime your circumstances change. 

Common Mistakes to Avoid 

Even minor mistakes can have consequences: 

• Using outdated “allowances” logic (no longer applicable since 2020) 

• Not updating after life events (marriage, divorce, new child, increase or decrease in income) 

• Claiming dependents on both spouses’ W-4s 

• Ignoring extra income from side gigs, freelance work, or investments 

• Forgetting multiple job interactions 

• Submitting changes too late in the year 

Pro tip: Review your withholding after any major income change or annually to stay on track. 

Refunds vs Paychecks: Finding the Balance 

Many taxpayers aim for large refunds, but over-withholding effectively loans the IRS your money. Conversely, under-withholding can create penalties. Finding a balance ensures your paychecks are sufficient to cover expenses while minimizing risk of a large tax bill. 

Let’s look at an example. If you over-withheld $2,000 last year, that money could have been invested or used for high-interest debt instead. Adjusting withholding based on your actual tax liability can improve cash flow and financial flexibility. 

Special Situations 

Everyone’s tax situation is unique, and certain circumstances require special attention when filling out your W-4. 

Students or Dependents: 

Students claimed on a parent’s return should generally select “Single” for filing status and consider extra withholding if income exceeds the standard deduction. However, this may not always be correct. For example, married students should file as MFJ or MFS. 

Self-Employed or Gig Workers: 

W-4 only applies to employment income. Use estimated quarterly tax payments or extra withholding for income not covered by payroll. 

State Withholding: 

Check your state’s requirements, as some use a separate form for state taxes. 

After You Submit 

Once the W-4 is submitted, payroll will implement changes in 1–2 pay periods. Monitor your paychecks to ensure accurate withholding. Revisit your W-4 after major life or income changes, or at least annually. Even modest raises, bonuses, or small changes in deductions can meaningfully affect withholding, so proactive management is key. 

Updates and Considerations for 2025 

For 2025, standard deductions have increased to $15,750 for single, $23,625 for head-of-household filers, and $31,500 for married filing jointly. Always check for new tax credits or phase-outs, and remember that employer payroll systems may update W-4 software to reflect new thresholds. Staying proactive with your W-4 ensures you avoid surprises and take full advantage of current tax laws. 

Making the W-4 Work for You 

Filling out a W-4 is not just a task to check off; it’s a financial tool. Strategic use of Steps 2–4 can help you optimize withholding to fit your life. Use the IRS estimator for precision, adjust incrementally if unsure, and always consider both short-term cash flow and long-term financial goals. 

Frequently asked questions About W-4s 

What happens if you fill out a W-4 incorrectly? 
Filling out a W-4 incorrectly can result in too little or too much tax being withheld from your paycheck. Under-withholding may lead to a tax bill and potential penalties, while over-withholding reduces your take-home pay unnecessarily and delays access to your money until you receive a refund. 

What percentage of my paycheck is withheld for federal tax? 
The percentage withheld for federal tax depends on your filing status, income, number of dependents, and any additional adjustments on your W-4. Using the IRS Tax Withholding Estimator or reviewing your pay stub can help determine the exact withholding percentage for your situation. 

Can I update my W-4 at any time? 
Yes, you can update your W-4 at any time during the year. It’s recommended to submit a new form after life changes, such as marriage, divorce, having a child, or changes in income, to ensure accurate withholding. 

Do I need to fill out a W-4 for multiple jobs? 
Yes, if you have multiple jobs or your spouse works, completing Step 2 of the W-4 ensures proper withholding. Typically, only the highest-paying job completes Steps 2–4(b), while other jobs leave those sections blank to prevent over-withholding. 

How do dependents affect my W-4 withholding? 
Claiming dependents on your W-4 reduces the amount of tax withheld from your paycheck because the IRS allows tax credits for qualifying children and other dependents. Only one spouse should claim these credits to avoid under-withholding and potential tax bills. 

Tax Help for Those Who Owe   

Life changes, side income, and new tax laws make accurate withholding essential. A thoughtful approach to your W-4 keeps your finances under control, minimizes surprises, and maximizes the use of your money throughout the year. 

Final Thought: A properly completed W-4 gives you control over your money, not the IRS. It balances taxes owed with paychecks received, and empowers you to manage your financial life strategically, instead of waiting for a refund at tax time. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers.     

If You Need Tax Help, Contact Us Today for a Free Consultation