How tax pros can help their clients fill out Form W-4

Tax planning doesn't stop at filing season, and that includes Form W-4. Whether it’s filled out at the start of a new job or at tax time when a tax deficiency is calculated, taxpayers may need your assistance. Here’s a practical guide to filling out some of the trickiest parts of the W-4. 

How to change the withholding amount

If a taxpayer needs to increase their withholding, determining how to do so can be difficult. 

There is no universal answer because Step 2(c) and filing status are not direct substitutes. Step 2(c) is a multiple-jobs adjustment, while selecting single or married filing separately is the filing status choice in Step 1 on Form W-4. For a two-job household, the better practice is to use the multiple-jobs tools as intended, rather than changing the filing status just to force more withholding. If Step 2(c) is used, both jobs check the box, and if the jobs do not pay similar amounts, it may result in more withholding than necessary. The Multiple Jobs Worksheet is designed to be more tailored because it combines income from all jobs and calculates an additional withholding amount.

Who claims the children?

In a household where both taxpayers are working, deciding who can claim the dependents on Form W-4 can be challenging. Form W-4 can be used to identify the best taxpayer.

In a multiple-job household, Step 3 should generally be completed on only one Form W-4 so that the credits are not counted twice. The IRS instructions state that Steps 3 through 4(b) should be completed for only one job, and withholding is generally most accurate when those steps are completed on the Form W-4 for the higher-paying job. If more than one job has more than $120,000 in annual wages, or there are more than three jobs, then additional tables are available in Pub. 505, Tax Withholding and Estimated Tax, or you can use a withholding calculator to help determine the amount that should be withheld.  

When one taxpayer earns more than the other

Some households have one taxpayer who earns more than the other taxpayer or perhaps the second taxpayer has multiple jobs with no withholding. In this situation, one taxpayer could withhold more to offset the other taxpayer's lack of withholding.

If the higher-paying job is carrying the multiple-job adjustment through the worksheet or estimator, the lower-paying job’s Form W-4 should usually be kept simple. Complete the identifying information and signature and leave Steps 3 through 4(b) blank. Do not duplicate the extra withholding adjustment on the lower-paying job. The exception is Step 2(c). If that method is used, the box must be checked on both Forms W-4.  

Avoid year-end tax surprises

Help your clients avoid tax surprises next season by withholding the right amount of tax on their Form W-4.  It takes just a few minutes to guide your clients through the Multiple Jobs Worksheet and to choose the withholding options that fits their situation. Because Form W-4 outcomes depend on each household's full picture of income and jobs, review current IRS instructions before advising a client on the specific entries for their form.