When you first filled out your W-4 tax form as a new employee, you probably didn’t think much about it afterwards. But what if you’re filing your taxes a year later and you discover you had fewer taxes withheld from your paycheck than expected. Do you have any recourse if you suddenly owe the IRS big-time?
What Is the function of the W-4 tax form?
Let’s back up a little to explain the W-4. As an employee, your employer withholds a portion of your wages to pay federal and state income taxes on your behalf. The W-4, or Employee’s Withholding Certificate, is an Internal Revenue Service (IRS) tax form that tells your employer how much they need to withhold from your paycheck to then pay taxes for you.
Please note: while many states may reference this form to calculate state withholdings, Form W-4 is only for federal taxes. Your state may require a similar form be completed for state taxes.
When should I fill out a new W-4 tax form?
New employees are legally required to complete a W-4 with their new hire paperwork for every U.S. employer. With time, other situations in work and life may necessitate re-evaluating your tax withholdings several months and/or years into your job.
Unfortunately, most systems won’t automatically prompt you to submit a new W-4, no matter the circumstance, making it your responsibility as an employee to update your W-4 when needed. Some instances when you may want to review and submit a new W-4 include but are not limited to:
- Starting a new job.
- Getting a second job.
- Being rehired (especially if you aren’t prompted to sign paperwork again).
- Getting a raise.
- Going from part-time to full-time status, or vice versa.
- Moving to a new state.
- Getting married or divorced, or becoming a widow(er).
- Having a baby or adopting a child.
- Having an adult child who gets married or moves out of the house.
- No longer qualifying as a dependent of any parents or guardian.
- Having a spouse who gets a new job or changes work status or pay.
Why are my taxes not what I expected from my W-4 tax form?
Taxes are much more complicated than the information you write on your W-4, as the IRS considers all sources of income beyond your current job to calculate your overall tax burden. This includes multiple jobs, IRA distributions, capital gains and losses, rental income, pension plans, charitable distributions, tax credits, and so on. Because of these complexities, it’s impossible for your employer to know your full tax situation.
Having said that, if your tax withholdings are less than what you expected them to be from the information you included on your W-4, first verify that you didn’t claim “exempt” on your W-4. This would mean that your employer was instructed to not deduct any federal income from your paycheck.
Your federal tax withholdings could also be lower due to pretax deductions you have coming out of your paycheck. This may include 401k, insurance premiums (e.g., health, dental, vision), flexible spending, or any other pretax benefit.
You should also check to see if your employer is paying you through multiple entities. When this happens, your paycheck is divided into smaller sums for each entity and queues a lower tax bracket for multiple paychecks rather than the appropriate tax bracket for your total paycheck.
How should I adjust my W-4 if I don’t have enough taxes being withheld?
To adjust your withholdings moving forward, first consider using the IRS Withholding Estimator Tool to calculate your current tax burden. Once you know how much to enter in the appropriate fields, adjust your W-4 via the Stratus System or Stratus.hr Mobile. If you’re not affiliated with Stratus.hr, complete the W-4 pdf and submit it to your employer.
Most companies allow you to make changes to your W-4 as often as you’d like, so changing your withholdings mid-year shouldn’t be a problem. If you don’t want to go through the withholding estimator tool, you can always manually enter an additional amount of “Extra withholding” in step 4(c) if you’d prefer more money be withheld from your paycheck.
Where do I find more information?
For more information about the W-4 tax form, please visit irs.gov. To learn more about how Stratus.hr can help simplify your role as an employer by providing tools like an online system and a mobile app for employees to update their W-4 whenever they’d like, complete the form below and our team will contact you shortly!
Disclaimer: While Stratus.hr can explain the W-4 tax form and instruct you on how to use the system to fill it out, we are not tax advisers and cannot advise you on which elections you should make. It is your responsibility to make sure your Form W-4 is correct.