Check if your employer is withholding the right amount of tax from your paycheck. Get specific recommendations for your W-4 form to avoid a surprise tax bill or an oversized refund.
The W-4 form was redesigned in 2020 and no longer uses allowances. Instead, it uses a straightforward approach: you enter your filing status, claim dependent credits on Line 3, report other income on Line 4(a), claim extra deductions on Line 4(b), and request additional withholding on Line 4(c).
Getting your withholding right matters. If too much tax is withheld, you're giving the government an interest-free loan all year and waiting for a refund. If too little is withheld, you'll owe money at tax time and may face an underpayment penalty if you owe more than $1,000.
Multiple jobs complicate withholding because each employer withholds as if their salary is your only income. This typically causes under-withholding because each job claims the full standard deduction. The W-4 has a multiple-jobs worksheet for this, or you can use Line 4(c) to add extra withholding per paycheck.
Major life changes — marriage, new job, new child, side income — are all reasons to update your W-4. You can submit a new W-4 to your employer at any time during the year. The IRS recommends checking your withholding at least once per year.