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How to Estimate Federal Withholding

Updated for Tax Year 2020


OVERVIEW

Adjusting your withholding will ensure that you don't have too much (or too little) federal income tax withheld from your paycheck. Use Form W-4 to let your employer know how much you want them to withhold.


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Life events such as marriage, divorce, having a baby, or getting a promotion or bonus can have a big impact on your taxes. Filling out a new Form W-4 tells your employer how to calculate federal income tax withholding for your paycheck. That way, you won't wind up owing a big tax bill or having too much money withheld from your paycheck throughout the year.

  • If it's been a while since you filled out Form W-4, you should know that the form was entirely redesigned for the 2020 tax year.
  • The Tax Cuts and Jobs Act of 2017 significantly changed federal tax laws, so workers and their employers needed a more up-to-date form to calculate the amount of federal tax to withhold.

Here's what you need to do to complete this form.

Obtain a copy of IRS Form W-4

Your company's human resources or payroll department should be able to provide a copy of Form W-4. If not, you can always download Form W-4 from the IRS website.

Step 1: Enter your personal information

The first step to filling out Form W-4 is relatively easy to complete. Simply provide your name, Social Security number, and address. This section also asks you for your tax filing status.

If you're exempt from withholding — meaning you didn't pay any federal income taxes last year and don't expect to owe any this year — you can choose not to have any federal income tax withheld from your pay. In that case, just skip to Step 4 below. Otherwise, move on to Step 2.

Step 2: Calculate for multiple jobs or a working spouse

You might need help figuring out how to calculate federal withholding tax from your paycheck if

  • you have more than one job, or
  • you are married and your spouse also works.

The easiest way to do that is to use TurboTax's W-4 Withholding Calculator. It will walk you through a series of questions about your income, tax deductions, and credits, and it provides instructions for completing Step 3 and 4 of the form.

Just remember, while you need to fill out a W-4 for each employer you work for, you should only complete Steps 2 through 4 for your highest paying job. For other jobs, leave those steps blank.

Step 3: Claim any dependents

If you claim any dependents on your tax return, use the results from the W-4 Withholding Calculator to complete this section.

Otherwise, move on to Step 4.

Step 4: Factor other adjustments

This section is a catchall for other income, deductions, and adjustments to your withholding. Use the results from the W-4 Withholding Calculator to complete this section.

Note: If you determined that you're exempt from withholding in Step 2, simply write "EXEMPT" in the space under box 4(c) and move on to Step 5.

Step 5: Sign

The final section of Form W-4 requires you to sign and date the form. Then, simply return the completed form to your payroll department.

If you've been at your job for a while, your employer should already have a W-4 on file. You don't need to fill out a new W-4 if you're happy with your withholding. However, if you change jobs, you'll need to complete the updated version of Form W-4. You can also fill one out any time you want to adjust your withholding.

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