How to claim 1 on W4 2021

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How to claim 1 on W4 2021

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  • Form W-4 was redesigned in 2020 to reduce complexity while increasing the accuracy of calculating withholding amounts.
  • There are new ways to figure out your withholding amount, including an online IRS estimator tool.
  • Taxpayers with major life or filing changes should revisit the information in their W-4.
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If you're filling out a W-4 for the first time in a while, you might notice some changes in the form that tells your employer how much tax to withhold from your paycheck. The Internal Revenue Service redesigned it in 2020 in a way that's intended to make things easier and more accurate. While the underlying information is the same, the new W-4 "replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees," according to the IRS.

Getting your withholding amount right is important because it can keep more money in your pocket by not overpaying and ensure you don't have a hefty tax bill when tax season rolls around because you haven't paid enough. Here's what's changed in the W-4 and how to fill one out.

The new W-4 form

If you're like most employees, you probably last filled out a W-4 form when you were hired at a new company. But it's also wise to revisit it periodically as your income, personal situation, and filing status changes.

The 2020 redesign was to reflect changes to tax law made in 2017 by the Tax Cuts and Jobs Act. More specifically, taxpayers no longer claim personal or dependency exemptions, meaning, the withholding amount is no longer tied to these exemptions. Calculating the withholding rate is done another way.

"In order to lower your withholding, you must now claim dependents or use the deductions worksheet," says Josh Zimmelman, managing partner of Westwood Tax and Consulting.

The IRS says employees who furnished a W-4 to employers in years prior to 2020 do not need to fill out the redesigned Form W-4. Employers will continue to use the information from past W-4 forms to calculate tax withholdings for the employee.

The main differences between the old Form W-4 and the one for 2020 and beyond are steps 2 through 4 in the middle. These are the new sections (with accompanying worksheets) taxpayers can use to accurately calculate their withholding amount for a wide range of individual situations. You can skip these parts if they don't apply.

How to fill out a W-4 form

Step 1: Enter personal information

Source: IRS

This step is pretty straightforward. Enter your name, address, and social security number. Step 1(c), is your filing status. You can choose your filing status from one of three options:

  1. Single, or married and filing separately
  2. Married and filing jointly, or qualifying widow(er)
  3. Head of household

This selection will determine the standard deduction and tax rates used when calculating your withholding. It does not have to match what will be used on your actual tax return.

If none of the following scenarios apply to you, this is the only step you'll need to complete. Skip to step 5 to sign and date and then submit the form to your employer.

Step 2: Multiple jobs or spouse works

Source: IRS

The amount of income withheld depends on how much combined household money you make. You may want to complete this section:

  • If you have more than one job
  • If you and your spouse both work
  • If you receive a pension or other retirement income and have started working again
  • If a stay-at-home parent starts working again
  • If you have self-employment income

There are three options you have for completing this section, which is different with the new form. You can:

  1. Use the IRS withholding estimator at
  2. Use the multiple jobs worksheet on page 3 of Form W-4
  3. Simply check the box if there are only two jobs totalQuick tip: Fill out Form W-4 for the job with the higher income for the most accurate withholding.

Step 3: Claim dependents

Source: IRS

Add the number of dependents you can claim on your tax return. To qualify, your income must be less than $200,000 (or $400,000 if married filing jointly). The child must be under age 17 as of Dec. 31 and live with you for more than half the year.

Each of these children should qualify for the child tax credit so calculating these credits into your withholding amount will reduce the amount of tax withheld. These tax credits are also refundable tax credits, meaning, you could get back money above what was withheld by your employer.

If you have other dependents (such as an older child or dependent parent) living with you, you can claim a $500 tax credit for each of them.

Quick Tip: If you have two jobs, be careful only to claim dependents on one Form W-4.

Step 4: Other adjustments

Source: IRS

Step 4(a): If you have other income (not including income from employment), it will go here. If you have retirement income, you'll put it on this line so that the withholding amount for your primary source of income is accurate.

Step 4(b): If you expect to itemize deductions and take more than the standard deduction amount, you'll enter it here. This ensures you don't have too much tax withheld by your employer when you're expecting to take these deductions.

Step 4(c): If you have any additional amount you want deducted from your paycheck, it will go here. If you want a bigger refund, for example, you may want to have more taken out of your check. This amount is for each pay period. If you have an amount from the Multiple Jobs Worksheet, you'll include it on this line as well. Finally, this line can be used to make adjustments for other income or deductions when you don't want to disclose that information to your employer.

Step 5: Sign, date and file with your employer

Source: IRS

You'll sign and date it once you're finished. From there, your employer will take over and put in the appropriate information for the business name, your first date of employment and the employer identification number (EIN).

Worksheets on the W-4

There are two new worksheets to help taxpayers estimate the proper withholding amount. These aren't filed with the IRS like the first page of the W-4, but should be kept with your own records.

  • Step 2(b)  Multiple jobs Worksheet. The worksheet from step 2 is one of the three methods taxpayers can use to determine tax withholding amount when there are multiple jobs (the other two being the IRS' online withholding calculator and a checked box directly on Form W-4). Follow the instructions and use the tax table included on the worksheet to determine the withholding amount. Enter the result on line 4(c).
  • Step 4(b)  Deductions Worksheet. This worksheet instructs taxpayers on how to account for their expected deductions in their withholding amount. You'll enter an amount for expected itemized deductions or even student loan interest, deductible IRA contributions and certain other adjustments. You'll take this amount and enter it onto line 4(b) of the form.

When should I fill out a W-4?

Even though you may not need to fill out the new W-4 form, it's a good idea to periodically re-examine your life circumstances and update the information when warranted.

"W-4s should be revisited every year for accuracy, but more importantly every time a taxpayer has a life change or tax return change," says Jackson Hewitt Tax Services Chief Tax Information Officer Mark Steber.

Some examples of these instances include:

  • A large balance due or refund on your past tax return
  • An income change
  • A promotion or raise
  • A job change
  • A filing status change from marriage or divorce
  • A new dependent
  • A new side gig

There are other scenarios where you'll want to revisit your W-4. Retirees who draw from a pension and start working again, or a stay-at-home spouse who returns to work are examples of situations where you may need to adjust your tax withholding amount this year.

The financial takeaway

Getting your tax withholding amount right helps keep more money in your pocket while ensuring you have enough paid in to avoid an underpayment penalty. If you aren't sure the appropriate amount is being taken out of your paycheck, you can ask your tax professional for input or do it yourself with the IRS' new Form W-4 worksheets.Alene LaneyAlene Laney is an award-winning personal finance and real estate journalist based in the Southwest. She has written for a number of online and print outlets, including Insider, The Balance,, Smarter Travel, The San Juan Record and others.Read more Read less

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