Common Questions for W-4 Tax Withholding

What is a W-4?

A W-4 is a form published by the IRS in order to provide information relating to tax withholding.

When you file Form W-4, your employer uses this information to withhold the correct federal income tax from your pay. Withholding allowances vary from person to person based on a number of circumstances, including:

Whether you're married or single.

If you're single and have only one job.

If you're married, have only one job, and your spouse doesn't work.

If your wages from a second job or your spouse's wages are $1,500 or less.

If you have at least $2,000 of child- or dependent-care expenses and will claim a credit for these costs.

If you'll file your return as a head of household.

The more withholding allowances you claim, the less tax is withheld from your wages.

To help determine how many tax withholding allowances you should claim, it might help to look at your returns or payments from previous years. If you received a large refund, consider increasing the number of allowances you claim so less tax is withheld. If you paid the IRS a large sum when you filed your return, decrease the number of allowances you claim.


Is Anyone Exempt from Withholding?

You must have tax withholding if all of these apply:

Your income for 2016 is more than $1,050.

Another person can claim you as a dependent on his or her return.

You have more than $350 of unearned income. Unearned income includes interest on savings accounts and mutual fund dividends.

You can make much more and still be exempt from withholding if no one can claim you as a dependent.

If you owed no federal tax last year and expect to owe none this year, you might be exempt from withholding. For 2016, a single person who isn't a dependent can have as much as $10,300 in gross income before any tax is due.


Should I call my CPA if I have questions about tax withholding on any income source?

Absolutely!  Your CPA can perform a tax projection based on the amount of income or distribution that you are planning to receive.  That will give you a clear estimate of the percentage of taxes to be withheld.