As an employer, one of your primary responsibilities is ensuring you’re compliant with federal and state tax laws. You need to be familiar with various tax forms, including the IRS 2024 W-4 form. Form W-4, known as the Employee’s Withholding Certificate, is a federal tax form employees use to notify their employers about their tax withholding preferences. Through this form, employers can understand the amount of federal income tax to withhold from each employee’s paycheck based on their preferences.
Aside from determining tax withholding for employees, IRS Form W-4 helps prevent instances where too much or too little tax is withheld, which can lead to unexpected tax bills or refunds at the end of the year. Additionally, Form W-4 is used by employees to indicate any changes in their circumstances that may affect their tax withholding, such as getting married, having a baby, or having a second form of employment. These changes can impact the amount of taxes an employee owes to ensure employees don’t face penalties or interest charges from the IRS on incorrectly withheld taxes.
At the end of the year, employees will receive IRS Form W-2 from their employer, which is the IRS Wage and Tax Statement containing information about the employee and their earnings and tax, savings, retirement and childcare deductions.
In this guide, we explore the 2024 W-4 form in its entirety and Form W-4 2024 updates so you can ensure you’re compliant with the latest laws and regulations surrounding tax withholding.
Understanding Form W-4 (2024)
Each year, it’s important for employers to look into whether the IRS has made changes to any of their tax forms, including the W-4 federal 2024 form. By staying up-to-date on the latest changes, you can ensure you’re remaining compliant with the latest regulations set forth by the IRS. There are a few Form W-4 2024 updates that were released to streamline pension and annuity withholding.
To comply with the Tax Cuts and Jobs Act of 2017, the IRS made several changes to IRS Form W-4 to simplify the withholding process for employees. Step 2 of the IRS 2024 W-4 form was altered to include the IRS tax withholding estimator, which is particularly useful for individuals with multiple jobs or couples who are both working and married filing jointly. The emphasis on the withholding estimator is also beneficial for those anticipating partial-year employment or those who might be subject to the additional Medicare tax or net investment income tax.
Additionally, the IRS revised Form W-4P, which is the Withholding Certificate for Periodic Pension or Annuity Payments form. Starting in 2023, Form W-4P and Form W-4R, Nonperiodic Payments and Eligible Rollover Distributions, are mandatory to file and have the same adjustments as Form W-4 in Section 2, incorporating the tax withholding estimator.
For employees completing Form W-4 for the first time or for those looking to adjust their 2024 W-4 form, here’s how to complete each section:
- Section 1 – Personal Information: In these fields, individuals will input their name, address, Social Security number and tax filing status.
- Section 2 – Jobs: In these sections, individuals will input their employment information, accounting for multiple jobs. Their highest-paying job’s W-4 form will be used for steps 2 through 4(b), and line 4(c) can be used to instruct their employer to withhold a certain amount of extra taxes from each paycheck.
- Section 3 – Dependents: In this section, individuals can claim dependents, including children, to claim the child tax credit.
- Section 4 – Withholdings: Individuals can indicate if they expect to claim any other deductions other than the standard deduction.
- Section 5 – Signature: The final section requires individuals to sign and date their W-4 form.
One of the most important steps to understand when completing Form W-4 is the first step when it comes to identifying your tax filing status, as filing single, married, or as head of household can produce different outcomes. It’s important to choose a tax filing status that best represents your financial situation to ensure you don’t end up with a surprise tax bill at the end of the year. Other common mistakes include failing to update your withholding after life changes, ignoring additional income or deductions and claiming the wrong amount of allowances. Working with a trusted tax expert can help ensure accurate tax withholding.
Employees Managing Their Tax Withholding
It’s also important for employees to understand Form W-4 and when they may need to adjust their tax withholding. Calculating the right withholding ensures that not too much or too little funds are taken from each paycheck to pay for their taxes. Additionally, they may want to consider updating their tax withholding if there are any significant updates to the IRS Tax Code or if they’ve experienced a major life event that impacts their finances and eligibility for deductions and tax credits. Some common life events that may justify an adjustment to their tax withholding include:
- Marriage
- Divorce
- Birth or child adoption
- A child turns 17
- Retirement
- Home purchase
- End of employment for you or your spouse
- Filing for Chapter 11 bankruptcy
- You or your spouse starting a second (or any additional) job
- You earn investment income
- You or your spouse do gig work or start a side business
- You become eligible for tax credits like the earned income tax credit or child tax credit
- You become eligible for deductions like alimony or student loan interest
- You changed your pretax retirement contributions to a traditional IRA, 401(k) or other qualifying retirement account
Employees can use the IRS’s free tax withholding estimator to determine how much taxes they should have withheld from their paycheck each pay period. Here’s how to calculate tax withholding:
- Open the IRS tax withholding estimator: Start by opening the IRS tax withholding estimator, which estimates how much you will owe in federal income taxes. Major life events like marriage, divorce or starting a new or second job warrant an adjustment to your tax withholding.
- Prepare your documents: With the tax withholding estimator opened, gather your documents, including pay stubs from all jobs for you and your spouse, your most recent tax return and information on other additional income.
- Input your personal information: Enter your personal information, such as your tax filing status and whether you’re claiming dependents.
- Enter income: Then, factor in your income from every job source and any investment or unemployment insurance income, along with the amount of taxes already withheld from these income sources.
- Make adjustments: Once income is added, identify eligible deductions, such as Traditional IRA contributions, student loan interest and alimony, or whether you plan on taking the standardized deduction.
- Estimate tax credits: You’ll also be asked to estimate your tax credits, which can impact your tax bill. Select credits you’re eligible for, such as those for parents and guardians, college students, homeowners and retirement savers.
- Submit a new W-4: After using the tax withholding estimator, determine whether you need to submit a new Form W-4 to your employer to ensure the right amount of taxes is withheld for your tax situation.
Additional Resources
Explore our additional resources to learn more about tax withholding:
- Payroll Tax Forms: Employer Guide: Find information for employers on how to hand W-4 forms and other payroll tax forms.
- How to Calculate Your Tax Withholding: Explore detailed guidance on how to calculate tax withholding.
Ensuring a Compliant W-4 Process
Understanding how to accurately calculate tax withholding is crucial to ensuring your tax obligations are met and you aren’t faced with tax surprises or potential penalties. At Experian Employer Services, our tax withholding compliance services help ensure a smooth and seamless payroll process.