Payroll 101: Additional W-4 Information

What are withholding allowances?

The more withholding allowances you claim, the less you pay in federal income tax each pay period.  This is determined by the information you provide on the W-4 form. If a W-4 is not completed, zero withholding allowances will be entered and the maximum amount will be withheld for taxes.

Conditions for claiming withholding allowances:

    • One allowance for yourself, unless someone else (a spouse or parent) will list you as a "dependent" on his or her income tax return.
    • One allowance for your spouse, unless he or she is working and has already claimed an allowance for himself or herself at work.
    • One allowance for each child you list as a dependent on your tax return, unless your spouse has already claimed the child on his or her W-4 form.

Each individual in the family can be claimed one time by one person to gain a withholding allowance.

Other allowances you might claim:

    • One allowance if you're single and have only one job.
    • One allowance if you're married, have only one job, and your spouse doesn't work, or wages from a second job or spouse's job are $1,000 or less.
    • One allowance if you file as "head of household." To claim as "head of household," you must be single and paying more than half the cost of maintaining a home for yourself and your dependent(s).
    • One allowance if you spend at least $1,500 per year in out-of-pocket child care expenses, you must plan to claim a credit for this on your income tax return.
    • Information is provided on the W-4 worksheet to calculate additional allowances. These allowances include child tax credit, home mortgage interest, charitable contributions, state and local taxes, and some medical expenses.

If you have questions or need assistance completing the W-4 form, or call the IRS at 1-800-TAX-FORM (829-3676).


Can you claim to be exempt from Federal Income Tax Withholding?

You may be exempt from federal withholding, but this is not likely. The following conditions must apply:

    • You owed no federal taxes last year, all the federal tax withheld from you during the year was refunded to you when you filed your return,
    • You don't expect to owe any federal taxes for the current year.

Even if  you meet these two qualifications, you might not be exempt from withholding. Additional information is provided in IRS Publication 505.

High school and college students are not automatically exempt, they must meet the conditions above to claim an exemptions.

You have to renew your claim to an exemption each year by February 15.  If you do not, federal taxes will be withheld from your paychecks as if you were single and had zero withholding allowances.  Submit a new W-4 form to renew your claim.

No one is exempt from social security or Medicare tax, an exempt status won't affect these withholdings.


When should I submit a new/revised W-4 form?

A new/revised W-4 form must be submitted within 10 days if any of the following situations occurs:

    • Your living arrangement or financial situation changes, leaving you with fewer withholding allowances.  If you divorce, a previously nonworking spouse becomes employed, or a dependent moves out of the house.
    • You're no longer exempt, because you're going to have to pay income tax in the current year.  You have 10 days to submit a new/revised W-4 form.

You may choose to submit a new W-4 form if one of the following applies to you.  Submitting a new W-4 could result in less withholding tax and therefore an increase in your take-home pay.

    • Your living arrangement or financial situation changes, leaving you with more withholding allowances.
    • You or your spouse gives birth to a child,
    • A previously employed spouse is no longer employed.

If your name changes, you should submit a new W-4 form, but only after you receive a new social security card with your correct name. No changes can be made to your W-4 in advance of any of these situations.

No later than December 1 of each year, your employer must remind you to submit a new form for the next year if your marital status or number of allowances changes.  Your employer must also apply changes from any new W-4 submitted within a month of receiving the revised form.


What if my W-4 is rejected?

It is your responsibility to affirm that the information on your W-4 is correct, not your employer.  However, if your form has obvious problems, your employer may not accept it.  Any one of the following faults will cause your W-4 to be rejected.

    • Text of the form has been changed, either by crossing out parts of it or adding statements.
    • The form requests that a flat dollar amount of tax or a certain percentage of your wages by withheld,  this is not legal.  Federal income tax is calculated on the basis of your withholding allowances.
    • You acknowledge the information on the form is false.

If you submit an unacceptable W-4, you should submit a new one.  If you don't,your employer will assume that you have zero withholding allowances if you are a new employee, or will use your most recent W-4 form on file.  Failing to submit a valid W-4 could result in additional, unnecessary taxes being withheld from your paychecks.

Making a false claim on your W-4 form is a felony offense.  If you're found guilty, the punishment can be severe.

Even though submission by phone or computer may be the preferred method, you must be given the opportunity to receive and submit a paper W-4 form if you request to do so.

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