Is There a New W-4 Form You Need to Complete?

No, there was not a major redesign of the Form W-4 for the current tax year. The Internal Revenue Service (IRS) implemented the most significant overhaul of the form in 2020, and versions released since have only featured minor annual adjustments. These updates involve changes to the tax tables used in the worksheets. The current form is designed for greater accuracy than the previous allowance-based approach, helping people align their withholding with their actual tax obligations.

The Shift from Allowances to Dollars

The primary change introduced in 2020 was the elimination of withholding allowances. The old Form W-4 asked employees to claim a number of allowances for themselves, their spouse, and any dependents. This system was often a source of confusion and could lead to inaccurate withholding, resulting in either too much or too little tax being withheld.

The redesigned form uses a more direct, dollar-based method instead of the abstract concept of allowances. It asks for specific dollar amounts for tax credits and deductions, which more closely mirrors the structure of the Form 1040 income tax return. This approach allows the payroll system to calculate withholding based on concrete figures.

Completing the Current W-4 Form

The current Form W-4, Employee’s Withholding Certificate, is broken down into five steps, though not all are required for every employee. Step 1 is mandatory and captures your personal information, including name, address, and filing status. This section must be completed by all employees.

Step 2 is for employees who have multiple jobs or whose spouse also works. It provides three options to ensure enough tax is withheld: using the IRS’s online Tax Withholding Estimator, using the Multiple Jobs Worksheet included with the form, or checking a box to indicate there are only two jobs in the household with similar pay.

Step 3 allows you to claim dependents. You calculate the total credit by multiplying the number of qualifying children under age 17 by $2,000 and the number of other dependents by $500. Step 4 is for other adjustments, such as other income, deductions you expect to claim, or any extra tax you want withheld each pay period.

Finally, Step 5 is the mandatory signature and date line, which affirms the information you provided is correct.

When You Should Update Your W-4

You should submit a new Form W-4 to your employer whenever you experience a significant life or financial change. Starting a new job always requires completing a W-4. Other events also warrant a review of your withholding, including getting married or divorced, having or adopting a child, or when a child no longer qualifies as your dependent.

Your financial situation can also prompt an update. If your spouse starts or stops working, or if you take on a second job or generate significant side income, your previous W-4 may no longer be accurate. The IRS recommends that all employees review their withholding annually.

While employees who have been with the same employer since before 2020 are not required to submit the newer form, it is often beneficial to do so. Using the current, dollar-based form can provide a more accurate withholding amount, especially if your personal or financial situation has changed since you last filled one out. This can help you avoid a large tax bill or an unexpectedly small refund.