Form W-4: Definitions, Tips and Important Updates

What is Form W-4?

The Form W-4, sometimes referred to as just “W4,” is an IRS document that employees complete and submit to their employers to indicate how they would like their taxes withheld.

What does the Form W-4 tell an employer?

The Form W-4 essentially gives instructions from the employee about their situation to their employer. That way, the payroll system can properly calculate withholding from each employee’s paycheck. Although the W-4 has evolved over the years, its purpose remains consistent.

In summer 2019, the IRS proposed a revision to the W-4 that went into effect on Jan. 1, 2020. The 2020 W-4 reflected the suspension of personal allowances under the Tax Cuts and Jobs Act.

This was the form’s first major update since the Tax Cuts and Jobs Act was signed into law in 2017. The form was reformatted to increase transparency, simplicity and accuracy of payroll withholdings.

How has Form W-4 changed in 2025?

The IRS released the 2025 Form W-4 with only a few minor changes. One of those was a recommendation that employees should consider using the IRS’ Tax Withholding Estimator to determine the most accurate withholding amount.

Another change is an update to the 2025 tax tables for use with the Multiple Jobs Worksheet. This worksheet explains that for withholding to be accurate, employees should submit a new W-4 for all jobs if they haven’t updated their withholding amounts since 2019.

While much of the W-4 remains the same, you should be aware of some notable adjustments. Specifically, the standard deductions for each filing status increased slightly:

Who needs to fill out a Form W-4?

Your life is always changing, and updating your withholding information to reflect those changes is an essential part of maintaining your financial health. If your withholdings are too low, it could result in a higher tax bill with potential penalties at the end of the year. If you withhold too much, you may tie up money that you could use or save throughout the year.

You should fill out a new Form W-4 if any of these life-changing events apply to you:

• marriage
• divorce
• birth of a child or adoption
• purchase of a home
• changing jobs
• income from a side hustle
• getting a second job

How to fill out Form W-4 in 2025

Your employees may come to you often asking, “How do I fill out my W-4?” Consider these five steps:

1. Verify personal and demographic information

Employees first choose their filing status, which can be “Single or married filing separately,” “Married filing jointly or qualifying widow(er)” or “Head of household.” This step also requests an employee’s:

• first name
• middle initial
• last name
• Social Security number
• complete address

If an employee has only one job, no dependents and expects to take the standard deductions, they can skip straight to the final step after completing this section.

2. Account for multiple jobs

The employee will follow the instructions for only one of the following three choices:

• Complete an estimator on the IRS website and enter the results in Steps 2, 3 and 4 on the W-4.
• Complete the Multiple Jobs Worksheet on page 3 of the W-4 and enter the result in Step 4(c) of the W-4.
• If the employee has exactly two jobs — or the employee and their spouse have a total of exactly two jobs between them — the employee would check the box in this step. In doing so, they can expect a larger amount withheld from their paycheck; the employee’s filing status and income will determine the actual amount withheld.

3. Claim credits against withholding by claiming the number of dependent children and other eligible dependents

The more dependents claimed in this step, the lower your employee’s withholding will be calculated on each paycheck.

4. Make other adjustments

Employees may enter information about any other income, deductions or additional withholdings needed based on the worksheets in the W-4 instructions. Using the Step 4(b) Deductions Worksheet, the employee can fine-tune their withholding using their estimated itemized deductions rather than the standard deduction.

5. Sign and date the form

Once employees verify their information, they can complete the document by signing their name and dating it.

How to calculate the Form W-4 withholding amount

We are going to look at federal tax withholdings, but you can perform a similar process with your state withholdings. Every state is different however, so please consult your state’s withholding instructions for specific directions on calculating withholdings.

Step 1: Total your tax withholding

Start by looking at the amount of federal income tax withheld from each check. This information should be on your pay stub or digital payroll statement.

Step 2: Verify your taxable income

To find your taxable income, add up all the money you made this year. This includes everything from your salary to side-gig income, interest to even unemployment benefits. This figure is your gross income.

Now subtract any adjustments or tax deductions from your gross income to find your taxable income. Adjustments could include things like student loan interest, 401(k) contributions, traditional IRAs, pre-tax deductions such as health care premiums or money put into a Health Savings Account (HSA).

Tax deductions can be itemized, but you can also follow the standardized deductions from the table above.

Step 3: Use IRS tax withholding estimator

Using your taxable income figure, you can determine how much you owe. This is called your tax liability.

Because the U.S. uses a progressive tax system, your tax rate will change depending on the amount of your taxable income. Let’s look at an example for a taxpayer who is married and filing jointly. If your taxable income is $81,500 for 2025, you will be in the 12% tax bracket, but that doesn’t mean you pay 12% on your entire income. What you pay breaks down this way:

• You pay 10% on your first $23,850, or $2,385.
• Then you pay 12% on the next $57,650 ($81,500 – $23,850), which is $6,918.
• Your tax liability equals $9,303 ($2, 385 + $6,918).

When not to use the online IRS Tax Withholding Estimator

There are a few cases in which the IRS recommends not using their estimator tool. Those include:

• Filers with nonresident alien status. These individuals should refer to Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens.
• Individuals with complex tax situations, including the alternative minimum tax, should consult Publication 505, Tax Withholding and Estimated Tax.

Now that you know your expected tax liability, it’s time to compare that to the total amount that was withheld during the year. If you subtract your tax liability from this total withholding figure, you’ll find how much you owe. If the withholding is greater than your tax liability, you’ll get that difference back as a tax refund. If your tax liability is greater than the amount you withheld, you’ll have to pay the difference when you file your annual tax return.

Taxes are a complex situation, so we recommend that you refer to the IRS’s Publication 505, Tax Withholding and Estimated Tax, or your tax advisor for more information.

Tips for choosing the right withholding amounts

It’s common to wonder if you have the right withholdings set up with your employer. Here are a few points to examine while you’re wondering if you’ve made the best decisions regarding your Form W-4.

Understand your tax situation

Make sure you have a clear idea of what your gross and taxable income will be when the end of the year comes around. This will determine which tax bracket you’ll fall into and will have a large impact on your tax situation.

Adjust based on your financial goals

What are your financial goals? Do you need as much possible cash flow during the year, or are you comfortable paying a little extra to avoid the possibility of a large tax bill at filing time? You can adjust your Form W-4 information based on these goals.

Account for multiple jobs or a working spouse

Like the first point above, don’t forget to account for freelance work, a second job or a spouse’s income, and definitely don’t forget to address the tax liability of these other sources of income.

Claim dependents and credits accurately

Claiming dependents and tax credits can have a favorable impact on your tax liability, but if you make these claims inaccurately, you open yourself to costly fines and penalties.

Consider additional withholding for extra income

Don’t forget to account for income that isn’t covered by a Form W-4 from a full- or part-time position. This additional income can increase your total tax liability and what may have once seemed like a suitable Form W-4 setup may be unsuitable for a tax liability made up from multiple income streams.

Factor in itemized deductions

Itemized deductions can have a substantial impact on your tax liability. These charitable donations, expenses and other factors reduce the amount of taxes you owe at the end of the year.

Use the IRS withholding calculator

Calculating your own tax liability and related withholdings can be complicated, but the IRS’ Tax Withholding Calculator can help you better understand your tax situation.

Common mistakes to avoid when filling out Form W-4

Here are some common mistakes people make when filling out their Form W-4.

Not updating after life changes

As your life changes, your tax liability can change, too. Taking these changes into account and updating your withholding in a timely manner makes it easier to correctly calculate the amount of taxes you need to pay. See the list above under the discussion about who needs to fill out a Form W-4.

Not accounting for multiple jobs or spouses

Having a spouse or working more than one job makes withholding calculations a bit trickier, and if you leave money out, you may owe more at tax time.

Claiming too many allowances

Before 2020, the W-4 used allowances, which caused some confusion. An extra allowance meant less tax was withheld, but many people assumed it was about how many dependents they claimed.

Not claiming dependents correctly

If you claim too few dependents, you’re missing out on valuable tax benefits. If you claim too many, you could be facing the penalties and interest that arise from severely underpaying.

Not signing the form

In digital systems, you can’t update your Form W-4 without a signature. If you’re still using manual systems, however, be sure that you’ve signed your new Form W-4 after making changes.

Overestimating or underestimating deductions

Like incorrectly claiming your dependents, over- or underestimating deductions can cause costly consequences.

Not reviewing withholding annually

Tax laws change every year, so reviewing your current elections is the best way to avoid making costly errors in your filing.

Do employees need to fill out a new Form W-4 every year?

While existing employees don’t need to file a new W-4 every year, new hires and current employees who need to make changes must use the updated W-4.

Employers may ask — but not require — employees to replace existing pre-2020 forms. They may not treat employees with older forms as failures to submit. (Exception: Those who claim the “Exempt” status are required to resubmit by Feb. 15 each year.)

How often should employers remind employees to complete a new Form W-4?

The IRS recommends that employees should complete a new Form W-4 annually. To help, it’s generally best to remind your team to complete a new form each December if they’ve encountered any changes to the personal information that impacts their tax status.

Tax-exempt employees

Employers should remind tax-exempt employees to complete a new Form W-4 every year before February. This will help these workers retain their tax-exempt status.

How many times can employees adjust their Form W-4 in a year?

Employees may update their Form W-4 as often as they like. However, most will generally opt to do so when they experience a notable change to their tax status, which could be spurred by:

• marriage
• a new dependent
• changed or additional income (i.e., a second job)

Easy-to-use self-service software makes it easy for employees to manually update their W-4, even outside of work.

What’s the difference between a Form W-4 and Form W-4P?

While the Form W-4 certifies the withholdings for federal taxes on your income, the Form W-4P certifies holdings from:

• periodic pensions
• annuity (including commercial annuities)
• profit-sharing and stock bonus plans
• individual retirement arrangement payments

IRS Form W-4 resources

Use these helpful resources to guide your Form W-4 discussions:

• 2025 Form W-4 – Download
• IRS “About Form W-4, Employee’s Withholding Certificate” – Learn More
• IRS FAQs on the 2020 Form W-4 – Learn More
• Publication 15-T: Federal Income Tax Withholding Methods (pg. 9-11)
• IRS Paycheck Checkup

How Paycom eases Form W-4 navigation

Our single software automatically alerts HR and payroll administrators when employees complete new Form W-4s. Plus, deductions automatically flow into payroll without the need to rekey data.

Beti^®, our automated payroll experience, gives employees the opportunity to verify their deductions — and guides them to fix inaccuracies — before submission.

Frequently asked questions about Form W-4

What is a W-4 tax form used for?

Form W-4 helps your employer withhold the correct federal income tax from your pay.

What is the difference between Form W-4 and Form W-2?

Form W-4 helps your employer withhold your federal income taxes, while Form W-2 provides the employee with year-end information so they can file their taxes.

How to adjust your W-4 Form?

Just complete a new Form W-4 and submit it to your employer.

What is the difference between Form W-4, W-4P and W-4R?

Form W-4 applies to your withholdings from pay for federal taxes. Form W-4P is the withholding certificate for periodic pension or annuity payments, and Form W-4R is the withholding certificate for nonperiodic payments and eligible rollover distributions.

How can I have more taxes taken out of my paycheck?

Simply change your withholdings by completing a new Form W-4 and submitting it to your employer.

How can I have less taxes taken out of my paycheck?

Simply change your withholdings by completing a new Form W-4 and submitting it to your employer.

What does exempt from taxes mean?

A tax exemption means that an individual does not have to pay some or even all taxes on certain expenses, income and/or sources of revenue.

How is the tax amount withheld determined?

The amount of tax withheld from your pay depends on what you earn in a given period and how that total is affected by your allowances or exemptions.

What are withholding adjustments?

These are things that can adjust the total amount of your taxable income. They include, but are not limited to, IRA deductions, student loan interest deductions or alimony expenses.

How does the Form W-4 affect FICA taxes?

Form W-4 has no impact on FICA taxes.

What is the eligibility to claim exemption in Form W-4?

An employee can claim exemption for the prior year if they had a right to refund all of their federal income tax because they had no tax liability.

Can self-employed individuals use Form W-4?

Form W-4 is intended to be used by employees who are not subject to self-employment tax.