W4 Tax Withholding - Guidelines

Why do I need to fill out a W-4?

The information you provide on the form helps your employer figure out how much federal income tax to
withhold from your paycheck.

How do I know if I'm exempt from withholding?

Your employer isn't required to withhold for federal income tax if you had no tax liability the previous tax
year and expect to have no tax liability for the current tax year. If that's the case, simply fill out lines 1, 2,
3, 4 and 7 of your W-4 and return the signed form to your employer. Don't neglect submit W-4. Without a W4 on file, an employer is required to withhold at the highest rate.

What are Withholding Allowances?

Withholding allowances adjust the amount of income that is subject to federal income tax. You can adjust
your withholding allowances at any time during your employment. Employees also can submit a new Form
W-4 at any time during their employment in order to change their withholding allowances.

How do allowances work?

The number of allowances that you claim determines how much your employer will take out of your check
each pay period to cover federal income tax. The more allowances you claim on your W-4, the more money
you will receive per paycheck. The fewer allowances you claim, the less you will receive each paycheck.
Each April at tax time, your 1040 tax return will determine whether too much or too little money was
withheld from you paychecks throughout the year. If too much was taken out of your paychecks, you will be
getting money back from the IRS (refund). If too little was taken out, you will have to pay the IRS more.

W-4 Form

Look over the two pages of the Form W-4, and familiarize yourself with the format of the paperwork. On the
first page, there are brief instructions, followed by a Personal Allowances Worksheet, followed by the actual
Form W-4 that is given to the employer. On the second page, there are two additional worksheets: the
Deductions and Adjustments Worksheet followed by the Two-Earners/Multiple Jobs Worksheet. Finally,
there are two tables, which are related to the Two-Earners/Multiple Jobs Worksheet.
Step 1
Begin with by figuring out how many withholding allowances to claim. Youre going to do this first, before
filling out the rest of the form so that in case you need to discard the form, there won't be any of your
personally identifiable information on the page (such as name, address and Social Security number).
Step 2
Start with the Personal Allowances Worksheet. Work through lines A through H. Be aware, that the questions
being asked on these worksheets relate to the current tax year. Also be aware that married couples who
anticipate filing jointly should calculate their withholding allowances jointly, and then divide those

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allowances between themselves. "If both you and your spouse are employed and expect to file a joint
return, figure your withholding allowances using your combined income, adjustments, deductions,
exemptions, and credits. Use only one set of worksheets. You can divide your total allowances any way, but
you cannot claim an allowance that your spouse also claims".
Some clarification E (Head of Household) - You can claim head of household filing status on your tax return only if you are
unmarried and pay more than 50% of the costs of keeping up a home for yourself and your dependent(s) or
other qualifying individuals in the US. Hence employees who are single in US or married but single in US
cannot claim as head of household even though you are incurring more than 50% of the cost of maintaining
your family in India.
F (Child and Dependent Care Expenses) - You may be able to claim the credit if you pay someone to care for
your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or
herself. The credit can be up to 35% of your expenses. To qualify, you must pay these expenses so you can
work or look for work.
G (Child Tax Credit) - This credit is for people who have a qualifying child (Son/ daughter who is age 17 or
below at the end of current tax year who did not provide over half of his or her own support and lives with
you for more than half the year and is claimed as a dependent in your return and has is a US
citizen/national/resident alien). It is in addition to the credit for child and dependent care expenses
H This is summation of the allowances (nos.) you entered in rows A G, which flows to Box 5 below.

Filling Out the W-4

Boxes 1 and 2 of the form are self-explanatory and include your name, address, and social security number.
Box 3 Tax Rate - This box will determine your tax rate. If you are married but want to be taxed at the
higher single rate to ensure that that enough money is taken out for taxes, then check that box. Please note
that by checking this box, your ability to file as married filing jointly on your tax return is in no way
affected. Kindly check Single even if you are legally married, if you are living alone in US. You can resubmit revised W4 as Married when your family joins you at a later date.
2. Box 5 Personal Exemptions. This no. is the same which you have arrived at in row H.
For Married Couples
If you are married with no children, and both you and your spouse are employed, you must coordinate how
each of you will fill out the form. For example, if each of you place 2 personal exemptions of the W-4,
then come April, your combined incomes and withholdings on your tax return will reflect a total of 4
personal exemptions even though there are only 2 of you. This will surely lead to an under-withholding from
your paychecks and result in a liability to the IRS. In this scenario each of you only put the number 1 into
Box 5 or one spouse use 2 while the other uses zero. Either way, the combined total exemptions (from both
of your W-4s) in Box 5 should not exceed 2.
For Those with Multiple Jobs

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If you are working for more than 1 employer at the same time, you should not claim 1 exemption on each
W-4 for each employer. Why? Just as above, the best way to answer this is to provide an example. If you are
single, you would essentially be claiming 2 exemptions when only 1 should be claimed. The solution is to
claim 1 exemption on the first W-4 and zero on the other.
Box 6 Additional Allowance
When you decide how much to withhold from your taxes throughout the year, you want to choose an amount
that will result in you neither receiving a refund nor owing a large additional amount in taxes come April. If
you got hit with a tax bill when you filed this past year and you are being recommended the same
withholding as last year, you can add in additional withholding so you dont have a big tax bill again next
year. Add in the additional withholding on line 6 of the form. Just divide the amount of your tax bill by the
number of pay periods left in the year and write that down. For example, if you owed $3,000 in taxes last
year and get paid twice a month, youll put $125 on line 6 ($3,000 divided by 24 pay periods).
Box 7 Exemption from withholdings Check whether you meet the two criterions mentioned therein and
fill up the box accordingly.
Date and Sign the Form
Box 8, 9 & 10 Leave it blank

Page 2 of W-4

If you anticipate having a significant amount of income other than wages, and/or adjustments to income,
and/or anticipate itemizing your deductions in lieu of the standard deduction, then continue on to the
Deductions and Adjustments Worksheet. Work through lines 1 through 10 of that worksheet. You may need
to utilize worksheets found in Publication 505, Tax Withholding and Estimated Tax, to complete some
calculations. You may also need to refer to your tax return for the previous year to help you estimate nonwage income, adjustments to income, or itemized deductions.
Do you have two or more jobs as an employee? Continue on to the Two-Earners/Multiple Jobs Worksheet.
This worksheet is used for unmarried persons with more than one job and for married couples who plan to
file jointly and together they have two or more jobs. Work through lines 1 through 9 of this worksheet. You
may need to refer to the tables below it.

Thanks!

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