How to Fill out Form W-4 to Keep More Money in Your Pocket

April 10th, 2015 -- Posted in W4 Tax Information | No Comments »
Employers & W-4 Forms:

Most working people are familiar with a W-4 form. W-4 forms are required to be filled out and returned to your employers HR department usually upon hire. The W-4 form plays an important role when income taxes are filed.

A W-4 form supplies your employer as well as IRS with important information about the employee. This particular form contains information about an employee including name. address, social security number as well as number of dependants.

There is really no law in force that dictates how many dependants, if any an employee must claim. An employee has the option to declare zero dependants if desired. However, it is important to take a number of things into consideration before deciding what to declare as far as dependants or exemptions are concerned.

Considerations Prior to Completing W-4 Form:

Before completing information on the W-4 concerning dependants, the person must consider their total gross income, amount of family members in a household and if there is another working spouce residing within the home.

It is always nice to have extra money in your pocket when you are working. There are certian things that can be done so that the employee ends up with more cash in their pocket each time they are paid. Therefore, the amount of money the employee takes home each week leaves them more pocket or spending money.

Declaring Dependents/ Exemptions:

In most cases if an employee declares themselves as a dependant or exemption they will take home more money each week. Therefore when filling out a W-4 form the employee must declare “one” dependant on the appropriate section of the W-4 form.

Keep in mind even though an employee may take home more money each week, they may end up paying or owing more income tax the following year. For example, if an employee declared one dependant as a witholding allowance within the 2014 year; this would be reflected when filing their income tax in 2015.

More Take Home Pay/ Paying Higher Income taxes:

In some ways putting more money in your pocket each week is helpful. However, in most cases the employee needs to be prepared to pay additional taxes when tax season comes around. It is best to speak with a seasoned accountant if you have any questions concerning deductions, exemptions as well as other withholdings.

A new W-4 form should be filled out each and every year for as long as an employee remains with the same employer. You can always change the number of dependents or exemptions claimed.

Itemized deductions

June 29th, 2011 -- Posted in W4 Assistance, W4 tax Form | No Comments »

Have you noticed itemized deduction items like mortgage interest, state and local income and property taxes, and charitable donations? By filing Form 1040, you can without difficulty write-off the full amounts on your itemized deductions. Good news is that: the current tax cut additional legislation cancelled the phase-outs for 2011 and 2012 as well.

For 2010, the highest adoption credit was increased to $13,170 (up from $12,150 in 2009). In addition, the credit was made 100% refundable for the 2010 tax year (previously, it was nonrefundable). This means that you will receive a check for any surplus adoption credit after your federal income tax bill has been condensed to zero. To claim the credit, fill out Form 8839 (Qualified Adoption Expenses), and enter the credit on line 71 of Form 1040.

Self-employed people can subtract their health insurance premiums on page 1 of Form 1040 (use line 29 for 2010). The deduction will help them to reduce their federal income tax bills. However, the self-employed have never been allowed to deduct those premiums while calculating their self-employment tax bills on Schedule SE. Good news is that for 2010 only, you will be able to deduct health insurance premiums. So those premiums will reduce both your income tax bill and your SE tax bill. Unfortunately, this break will not be accessible for 2011 and further unless Congress extends it.
In the majority of cases, only those who purchased homes in 2008 will be greatly affected. They will have to repay 1/15 of the credit with the 2010 Form 1040.

For 2008 and 2009, unmarried individuals who did not list could write off up to $500 of state and local real property taxes by claiming an increased standard deduction. Married, joint-filing couples can write off up to $1,000. The 2009 Stimulus Act created a temporary write-off for non-itemizers who paid state and local sales taxes on new vehicles purchased between 2/17/09 and 12/31/09. The write-off came in the form of an additional standard deduction allowance. Similarly, itemizers were allowed to claim an extra itemized deduction for such taxes. Both breaks failed at the end of 2009, and they were not reinstated for 2010.

Would you like to get lump-sum pension?

June 29th, 2011 -- Posted in W4 Assistance, W4 tax Form | No Comments »

Personal Allowances Worksheet:

Nobody wants to owe a lot of money or have the IRS come knocking on your door. The personal allowances worksheet will give you step by step instructions on exactly how to file out a W-4 Tax Form.

The W-4 Form starts at A and ends with H. You have eight questions to consider. You can see the W-4 Form online through the IRS provided PDF file.

Lump-Sum Pension Payout:

If you receive a lump-sum payment from your retirement plan, the plan supervisor is required to withhold 10% for federal income taxes.

If you plan to spin the funds over into an IRA or another tax-free pension plan yourself, the tax withholding requirement is 20%. This applies even if you have retired, quit or are laid off. If 20% is withheld, you would have to prepay tax you might not even owe – especially if you spin over the distribution within 60 days.

So, if you handle the spin over yourself by taking the check and depositing it in IRA within 60 days:

  • Your plan supervisor will withhold 20% of your distribution.
  • Unless you include the amount which is equal to the 20% withholding from another source, you will not have sufficient to put the full payment into an IRA.
  • The IRS will tax and possibly penalize any part of the gross distribution that is not spinned into an IRA within 60 days.

To shun having 20% withheld from your distribution, you should go for a direct spin over by following:

  1. Inform your employer that you want to roll the funds over directly to another plan or IRA.
  2. Give your employer all the information about the account that is going to receive the rollover funds.
  3. Your employer will transfer the funds directly to the other account without withholding any taxes.

If done in this way, the transaction will be tax-free to you completely.

Tips and Withholding:

All the tips you receive are taxable income subject to withholding. If you receive $20 or more per month in tips, you should report that income to your employer.

How to get freedom from withholding?

June 29th, 2011 -- Posted in W4 Assistance, W4 tax Form | No Comments »

Exemption From Withholding:

You must have withholding if any of these apply:

  • Your income for 2010 is higher than $950.
  • You have more than $300 of unearned income. Unearned income includes interest on savings accounts and mutual fund dividends.

If you cannot be claimed as a dependent, you can make much more and still be exempt from withholding.

If you owe no federal tax last year and anticipate owing nothing in the current year, you might be exempt from withholding. For 2010, a single person who is not a dependent can have as much as $9,350 in gross income before any tax is due.

If you earn $200 weekly or more and claim the exemption from withholding on your W-4, your employer might be asked to send the form to the IRS. If the IRS questions about the number of exemptions you claim, you will be required to justify your claim.

Working Couples and Withholding:

If both of you- you and your spouse are employed, outline the total allowances that you both are entitled to and divide those total allowances between you and your spouse. The W-4 has a special worksheet for 2-earning couples. It helps you and your spouse figure the number of allowances you should each claim based on each income.

Withholding and Retirement Income:

You can choose to have federal income taxes withheld from your:

  • Pension
  • Annuity
  • Traditional IRA withdrawals
  • Social Security benefits

With other retirement plans, you might be required to file a form with the payer to end the required withholding. If you do not complete the withholding forms for pension benefits, then taxes will be withheld as though you were married and claiming 3 exemptions. So, taxes will only be withheld if your pension is at least $2,080 per month.

You should re-evaluate each year to see if you want to have taxes withheld. Use Form W-4P to have taxes withheld from your pension, annuities, and IRAs.

Voluntary Withholding Request to have taxes withheld from Social Security. Choose any 1 of these rates for Social-Security withholding:

  • 7%, 10%, 15% or 25%

What is meant by W-4?

June 9th, 2011 -- Posted in W4 tax Form | 1 Comment »

What is Form W-4?
Form W-4, the Employee’s Withholding Allowance Certificate for federal withholding, is used to decide the personal income tax withholding status for employees to make certain that the suitable sum of Federal taxes are withheld from their earnings.

It represents your total tax deductions divided by the personal exemption rate. The withholding allowance is related to, but not the same as, the number of dependents you can declare on your tax return.

How to determine the appropriate amount of withholding to be withheld?
The Residents for Tax Purposes can calculate your withholding by making the use of “Withholding Calculator”

Nonresidents for Tax Purposes: They can only claim a Single Marital Status and a maximum of one Allowance. Exceptions include citizens of the following countries: Canada, India, Mexico and South Korea.

How to file W-4 form:
Using the W-4 form, you can easily know the right amount of federal income tax to have withheld from your check.

Important tips:
Since your circumstances might change from year to year, you should evaluate your withholding allowances each year. In 2010, each allowance you claim reduces your taxable income by $3,650. If you claim more allowances than you have a rational basis for, the IRS can penalize you. So, be careful!

If you received a huge refund, you should consider reducing the number of allowances you claim. This will reduce the amount of tax which is withheld. If you paid the IRS a large sum when you filed your return, you should raise the number of allowances you claim.

If you do not file Form W-4, your employer must hold back tax from your wages at the highest rate - as though you're single with no allowances.

After claiming the allowances for yourself and your dependents, you should add extra allowances if any one of these is applicable:

· You're single and have only 1 job.
· You're married, have only 1 job, but your spouse doesn't work.
· Your wages from a second job or your spouse's wages are $1,000 or less.
· You have at least $1,500 of child- or dependent-care expenses and will claim a tax credit for these costs.
· You'll file your return as a head of household.
· You'll claim child credits – which are worth $1,000 for each eligible child. The number of allowances you claim depends upon the number of eligible children and your income.

find related posts about w4 questions!

Getting The Answer To Your W4 Questions Straight By Knowing What Payment Strategy You Should Use

December 19th, 2008 -- Posted in W4 Assistance | No Comments »

If you are thinking about how to make filling out tax return forms less painful, you should really begin by knowing precisely how you should pay off your tax liability in the first place. Everything begins with your tax payment strategy. Once you have decided how, answering W4 questions should be a lot easier. There are 2 ways in doing so. One: you pay enough just so to cover the bases until next tax filing deadline. Two: you pay more in order to avoid the penalty for underpaying your tax liability.

In the first strategy, you can declare a lesser amount (as compared to strategy #2) and you may just get away without facing any IRS penalties at all. However, the problem lies when you gain a substantial profit for the covered year. In which case, you will be faced with paying off a higher overdue balance; not to mention the possibility of paying for penalties as well in the event someone notices your “oversight.” You can remedy this though, by simply filing another W4 tax return when you do earn more than your projected earnings for the covered year.

The second strategy dispenses away with the need to file a second tax return form. You simply pay a little more from the very onset, taking into consideration the possible earnings you will have from your savings account, or account from any money market source, or any proven stable investment schemes you may have. You do not have to include your possible earnings from speculative investments as these cannot be substantiated until they do materialize.

Finding Strategies That Work When It Comes To Answering W4 Questions

December 18th, 2008 -- Posted in W4 tax Form | 1 Comment »

Naturally enough, when it comes to filling out tax return forms, people would always want to find the best strategies to answer the questions quickly and painlessly. This is the same case when it comes to answering 1040 or W4 questions. However, simply ticking off boxes or randomly assigning 0 and 1 is not the way to best declare your financial liability.

There are two main strategies you can use if you want to determine how much tax liability you should declare for the incoming working year.

One: you make a detailed list of all your ongoing money making ventures. This can include current investments, ongoing home based business, possible earnings from saving accounts, and of course your current wages. Now comes the tricky part. You need to make a projection on how much you think you will be earning from these in the coming months. From there, you can base your tax liability. However, this strategy is full of pitfalls. For one thing, no one can accurately predict how much money can be earned from any form of investments – even if these seem to be quite stable. Even the most conservative or generous estimations can leave you paying too little or too much withholding tax. And these may still earn you penalties in the end.

Two: you could simply choose to pay 100% or 110% of the tax liability amount your paid from last year’s W4 or 1040 form. If you had an annual income last year of under $150,000, and you are not expecting any changes in financial, civil or legal status for this year, it would be safe to declare 100% tax liability. However, paying an additional 10% more will give you the leeway for avoiding future penalties should some unexpected changes happen for the incoming year.

Fielding W4 Questions: What Is The Easiest Way Of Getting The Amount For Tax Liability?

December 17th, 2008 -- Posted in W4 Assistance | No Comments »

W4 is a tax return form that basically declares how much tax should be withheld by your employer from your paycheck for the next year. Although this has some similarities with tax return form 1040, there are several differences between the two. For one thing, the amount you may be declaring for W4 may not correspond with the one you have for 1040. In theory, these declarations should be of the same amount. However, it seldom works that way.

One of the most important W4 questions is how much exactly tax should an employee pay. The easiest possible answer to this is to simply declare a payable amount of 110% from the previous year’s total tax liability. This is of course, assuming that you are still earning the same or slightly higher wage amount. If it is not your wont to compute your tax projection from scratch, simply take a copy of your accomplished 1040 tax return form from last year and look at line 56. Here, you will see the amount you have declared after “Total Tax.” Simply take that amount, compute for 10% and add that 10% to the Total Tax amount.

Example: last year’s declared amount is $10,000. 10% of that would be $1,000. Then this year’s tax liability should amount to $11,000.

In some cases, you may only be liable to pay 100% of last year’s tax, so paying for 110% may seem extreme. This is particularly true if your earning capability from last year was under the $150,000 mark; which means that you should only be paying for $10,000 (if we take the abovementioned example as basis.) However, paying for 10% more for this year’s tax liability projection will provide you the financial safety net in case something unexpected turns up.

Expedient Measures In Answering W4 Questions

December 16th, 2008 -- Posted in W4 Assistance | No Comments »

The W4 form is basically a way of gauging how much federal income tax should be deducted (withheld) from your paycheck within one working year. This form is very different from Form 1040 or the Income Tax Return form, although most information can be seen in both forms. In case you want to take less complicated measures in answering the W4 questions, here are some tips on how to do so.

1.  Download the *.pdf form from the IRS website or any reputable online page. Some companies provide their employees a virtual copy of the W4 for easier access.
2.  Fill out all pertinent personal information like name, Social Security Number, address and civil status. This will be a lot easier if you have all the information right there with you. Also, try to simplify matters considerably. For example, if you are living with someone but not really legally married, then simply tick off the ‘single’ box. Fussing over minor details will only make your work harder for you.
3.  Calculating your withholding tax allowances may be as simple as checking your personal exemptions on your 1040. However, should you decide to deviate from the details of your income tax return, then try to use the IRS Withholding Calculator (,,id=96196,00.html) for easier computation. You can also use the tables on the back of the W4 form.
4.  Go over your forms several times to ensure that the entries are correct before signing it and affixing the date.
5.  You need to submit the W4 form on the deadline your employer has set – and not the nationally set deadline. Your employer also needs to fill part of the W4 and submit this along with the W4 papers of the other employees.

W4 Questions: How Would I Know If I Am Exempted?

December 15th, 2008 -- Posted in W4 Tax Information | No Comments »

One of the most prevalent W4 questions is whether or not a person can claim exemption from withholding taxes. One general misconception is that only unemployed people are exempted from these taxes; but that is not necessarily so. Another misconception is that once you are declared exempted from withholding taxes, you skip filing W4 forms altogether. Again, that is not the legal way of doing so.

First of all, you can be working and be exempted from withholding taxes at the same time. If you did not declare any federal tax liability from the previous year; and you do not particularly think that you can do so for the incoming one, then yes, you may declare yourself exempted. Also, as stated in the Personal Allowances Worksheet, you (and your spouse, if you have one) can be exempted if your total annual income is less than $850; and that you do not particularly expect to receive more than $300 from unearned income such as investments in dividends and stocks.

On the other hand, if a person declares you as a dependent on his or her tax return, then you cannot file for exemption anymore. At the same time, you also cannot claim tax allowance on Question A of the Personal Allowances Worksheet.

Submitting a W4 is still essential if you are legally declared as exempted from withholding taxes. For legal purposes, you still need to submit the Employee’s Withholding Allowance Certificate with filled lines for 1-4, 7, the signatory box and the date box.