Waterford Business Solutions

Simplifying the W‑4 Form for Employees

(864)351-0852

Simplifying the W‑4 Form for Employees

A Step-by-Step Guide for Employees

Completing the W-4 form can feel daunting for both business owners and employees. Introduced in 2020, the redesigned federal Form W-4 aimed to streamline the process—removing confusing allowances and improving paycheck accuracy. However, even with the simplified format, many people still make errors that lead to under-withholding or surprise tax bills. This guide walks through each step in plain language so you or your employees can complete the form with confidence.

Why the W-4 Changed — and What It Means for You

Before 2020, employees claimed “allowances” on the W-4 to reduce the amount of tax withheld from their paychecks. However, the 2017 Tax Cuts and Jobs Act eliminated personal exemptions—forcing a redesign. As a result, the W-4 no longer uses allowances. Instead, it asks for specific details about filing status, number of jobs, dependents, deductions, and other income.

This change was designed to create more accurate withholding amount, reducing the chances of receiving a large tax refund or, worse, owing money at tax time. But that accuracy hinges on the form being filled out correctly. If not, paychecks may be over- or under-withheld, which can cause unnecessary financial stress.

Completing a Form W-4

Step 1 – Personal Information & Filing Status

This section might seem straightforward, but accuracy is critical:

  • Name, SSN, and Address: These must match your official tax records and what’s on your W-2.
  • Filing Status: Choose between:
  • Single or Married Filing Separately
  • Married Filing Jointly or Qualifying Widow(er)
  • Head of Household (only if you qualify—typically, you must pay more than half the costs of keeping up a home for a dependent)

Tip: Incorrectly claiming Head of Household when you’re not eligible can result in under-withholding—and an unpleasant tax surprise.

Step 2 – Multiple Jobs or Spouse Works

This is where mistakes often occur. If you or your spouse have more than one job, this section ensures your total household income is considered.

  • Option 1: Check the box if there are only two jobs in the household and they have similar pay. This will automatically adjust your withholding.
  • Option 2: Use the IRS Tax Withholding Estimator for more accuracy, especially if:
  • You have more than two jobs.
  • Job incomes differ significantly.
  • You or your spouse earn freelance or investment income.

How the IRS Estimator Helps:

  1. Go to the estimator website.
  2. Input job details, including pay frequency and year-to-date income.
  3. Add deductions like health insurance or 401(k) contributions.
  4. Include your spouse’s income or side gigs.
  5. Account for dependents and credits.
  6. Review the results showing estimated refund, tax due, and withholding suggestions.

Real-world example: An employee with a full-time job and a part-time weekend gig who doesn’t account for both may underpay taxes throughout the year. The estimator helps prevent that.

Even if you check the Step 2 box, using the estimator once or twice a year can catch hidden income sources or new deductions—providing more peace of mind.

Step 3 – Claim Dependents

This section allows you to reduce withholding if you’re eligible for the Child Tax Credit or the Credit for Other Dependents.

  • Multiply the number of children under age 17 by $2,000
  • Multiply other dependents (like aging parents or college students) by $500
  • Add the totals and enter them on Line 3

Tax Watch: These amounts are based on provisions from the 2017 tax law, which are set to expire after 2025. If not extended, the child tax credit could drop back to $1,000 per child, potentially affecting how you fill out future W-4s.

Step 4 – Adjust Withholding (Optional)

This section allows more customization for your tax situation.

  • 4(a) – Other income: Include non-payroll income such as freelance earnings, interest, dividends, or rental income.
  • 4(b) – Deductions: Enter the difference if you plan to itemize instead of taking the standard deduction. Common deductions include:
  • Mortgage interest
  • Charitable contributions
  • State and local taxes (limited to $10,000)

For 2025, the standard deductions are:

  • Single or Married Filing Separately: $15,000
  • Married Filing Jointly or Qualifying Widow(er): $30,000
  • Head of Household: $22,500
  • 4(c) – Extra withholding: Use this if you want additional tax withheld from each paycheck. This is often helpful if:
  • You earn side income
  • You receive bonuses
  • You expect to owe at tax time based on past years

Step 5 – Sign & Date

Remember this last (but vital) step! The form isn’t valid until it is signed and dated.

With your W‑4 completed accurately, you’ll avoid surprises at tax time—and keep more money in your paycheck throughout the year.

Digital Tip: If you use online payroll tools like QuickBooks, Gusto, or ADP, your form might be submitted electronically. Still, keeping a signed paper copy for your records is a good idea—especially if you’re an employer. Maintaining payroll records is essential for an employer. Check out this blog for a deeper dive into payroll records.

Common W-4 Mistakes to Avoid

Not updating after major life events:

Got married? Had a baby? Changed jobs? Your W-4 should reflect it.

Skipping Step 2 when applicable:

If additional jobs or a working spouse are involved, ignoring this step often leads to significant tax balances owed.

Guessing instead of using the estimator:

It’s tempting to “ballpark” numbers, but the estimator makes it easy to get precise results.

Forgetting about side income:

Freelance or self-employment income is still taxable—even if taxes aren’t automatically withheld.

Not reviewing the form regularly:

The IRS recommends reviewing your W-4 annually or whenever your situation changes. A quick check can save big headaches later.

Accurate withholding isn’t just about avoiding tax surprises—it’s about building financial stability. Take the time to get it right. Your future self will thank you.

Why It Matters for Business Owners

As an employer, you play a key role in helping your team get withholdings right. Even if you’re not a tax advisor, encouraging employees to fill out a W-4 form properly helps:

  • Avoid payroll surprises or corrections
  • Prevent employee frustration from large tax bills
  • Promote financial wellness in the workplace

Consider sending out an annual reminder to employees to check their W-4 forms—especially before open enrollment, raises, or system transitions.

We’re Here to Help

Tax laws evolve, life changes happen, and payroll systems update. Whether you’re hiring your first employee, managing a team, or simply want to get your personal withholding right, Waterford Business Solutions is here to support you.

Do you have questions about W-4s, payroll setup, or withholding strategies? Call us at 864-351-0852 or email info@waterfordbusiness.com to speak with a member of our team. We’re happy to walk you through it step-by-step.

Check out our YouTube video How To Properly Complete The W4 Form (2019 & Later) – Avoid Tax Surprises With Accurate Withholding with James for a first-hand recap. If you are still determining which plan works best for you, need additional help, or have any questions, Waterford Business Solutions is happy to help. Feel free to call us at 864-351-0852 or email us at Info@WaterfordBusiness.com.

Share This Article

Facebook
Twitter
LinkedIn
Email

Accounting Information

Understanding Estimat...

Understanding Estimated Tax Payments: What You Need to Know Paying taxes isn’t just something...

What are Certified Fi...

Certified financials are very detailed, reviewed, and notated reports that are one step below...

Why You Should Ensure...

As a business owner, one of the most common—and sometimes most frustrating—tasks you will...

HouseCall Pro Refunds...

When integrated into QuickBooks Online, HouseCall Pro can encounter issues when processing refunds because...

Service Titan

Businesses using ServiceTitan must ensure that general ledger accounts, business units, and price books...

Introduction to Accou...

Understanding accounts payable and its link to accounts receivable helps businesses stay financially stable,...

The Importance of Inv...

Tracking inventory is essential for business success, but many owners overlook the key steps...

Related Articles

Company Assets Waterford Business Solutions

Company Assets

Understanding and identifying company assets can be challenging. We will show you how to identify all types of assets in accounting and classify them!

Read More
Company Liabilities Waterford Business Solutions

Company Liabilities

Understanding and identifying company liabilities can be challenging. We will show you the types of liabilities in accounting and classify what you owe.

Read More

Simplifying the W‑4 Form for Employees