Finances and Taxes

Your 4 Biggest W-4 Questions, Answered

Leslie Harding Former Customer Experience Writer, Gusto 
Your 4 Biggest W-4 Questions, Answered | What is Form W-4? - Gusto

If Goldilocks were a government tax form, she’d be a W-4 form.

Bear with us for a second — the Employee Withholding Allowance Certificate, nicknamed the W-4, tells companies how much money they need to subtract from their employees’ paychecks and then send off to the IRS. And in true Goldilocks fashion, it’s extremely important to get that number just right.

In this article, we’ll show you how to master the W-4 form so you can allow your team to make more thoughtful decisions about their personal finances.

1. What is the W-4 form, anyway?

Along with the I-9, the W-4 is one of the first pieces of paper your new employees will have to fill out. Basically, the document itself is a hybrid form and worksheet. Bust out the pencils here — that worksheet section helps people determine their tax withholding.

Every time you run payroll for your team, you’ll be sending a slice of their paycheck — the withholding tax — directly to the federal government. This is an incremental payment that is credited to your employee’s income tax bill for the year. Done correctly, the W-4 helps shrink the amount of taxes people have to shell out in the spring.

2. When do my employees have to fill out the W-4 form?

Everyone should have a clean slate when they start a new chapter in their lives. That’s why whenever someone begins a job, they’ll have to submit a brand new W-4. And employees can update it whenever anything changes in their personal lives.

For example, if your team member ties the knot, has a baby, or buys a house, it will probably make them want to reevaluate their money situation. With the W-4, it’s a cakewalk.

Time for some tough love — even though you want to help your team, the W-4 form is something they have to tackle entirely on their own. The details of the form are extremely personal, and it requires an in-depth understanding of someone’s life in order to be completed correctly.

3. How do I help my employees fill out their W-4s?

First, let them know that it isn’t scary. In fact, they’re secretly W-4 pros because they already know most of the information they’ll be asked about. Put them at ease by prepping them with this list of questions:

What you’ll have to answer:

  • What’s your name and address?
  • What’s your Social Security number?
  • Are you married?
  • Are you claiming any dependents? (Note: The more you list, the less will be withheld)
  • Is anyone else claiming you as a dependent on their tax form? (Like a parent?)
  • How much do you make?
  • Are you filing as head of household? (If you answer “yes” to all of the questions below, this may be your filing status.)
  1. You paid over half of the cost to manage your home
  2. As of December 31st, you were not married
  3. You currently support a child, parent, or family member

Still baffled? Not to worry. Use this quiz from the IRS to help you make a final call on your filing status.

Allow us to explain allowances

Allowances — our first childhood hint of payday magic. But in IRS speak, allowances are a smidge different.

A withholding allowance is basically an exemption people can claim that then influences how much they’d like withheld from their paychecks. People get a certain number of allowances based on things like their filing status, marital situation, and a range of other factors. In essence, the higher the allowance number is, the less money is taken out of someone’s paycheck.

Getting that perfect allowance balance is crucial. You want to make sure your team isn’t saddled with a huge tax bill when April 15th rolls around — or for that matter, a whopping refund. A reimbursement that’s too big may not be wise financially, while the opposite situation can lead to unwanted penalties and interest.

Take a look at this quick, (generalized) breakdown:

  • If your parents claim you: Zero
  • If you’re single and have one job: You should typically claim two, but some people choose zero or one to increase their refund at the end of the year.
  • If you’re married with kids: Between you and your partner, you should claim a total of three allowances if you have one kid. If you have two kids, claim a total of four (one for each family member).
  • If you’re married without kids: In total, you and your partner should claim two allowances.

To help your team arrive at the perfect number, here are some tools to send their way:

Fall in love with modern payroll

4. Okay, my team just wrapped up their W-4s. Now what?

Time to celebrate! After your team knocks their W-4s out of the park, make sure they autograph them, date them, and hand them your way. All you have to do is find a secure spot to stash them.

If you’re using a payroll service that handles W-4s for you, you’ll probably already have an electronic copy on hand. Regardless, it’s still a good idea to have a physical version on file too. The IRS requires businesses to hold on to their forms for a minimum of four years, which is fairly easy to remember when it’s called a W-4.

Our tour of the W-4 has reached it’s final stop. By now, we hope you’re armed with a deeper understanding of the form so you can help your team fill it out with flying colors.

With a little education, your employees will feel more empowered about their financial decisions, and you both will discover how remarkable this simple sheet of paper can be.

Updated: November 1, 2019

Leslie Harding
Leslie Harding Leslie Harding is a former customer experience writer who helped small businesses get a better handle on payroll, taxes, and everything in between.


  • Colette Osweiler-Fritz

    If an employee moves then does the W4 have to be redone?

    • Caleb Newquist

      In general, no. It’s a good idea for employees to complete a new W-4 every January or February. It’s fine for them to update their address at that time.

  • bre

    Do i need to fill this out if its my first job, i really need answers, because im really confused

  • Shawna

    For 20 years I’ve been paying myself weekly and I pay estimated taxes. I don’t have a W-4. I’m a business owner. I have a K-1 and a 1040 and various other forms. I’m not sure how to estimate my “federal withholding allowance” or the “California withholding allowance”. Do I have to have an accountant helping with filling out information for Gusto?


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