Each year, the Internal Revenue Service issues a new W-4, and each year, many people don’t bother to fill it out.
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This happens despite the fact that there are significant things that can occur in any given year that might influence how you fill out a W-4. We’d argue that reviewing Form W-4 annually is an excellent habit for just about anyone, even if it’s not a federal requirement.
In this post, we’ll provide a quick overview of the 2022 W-4 for both employers and employees. We’ll show you exactly how to fill out the 2022 W-4, and we’ll walk you through the worksheets and withholding estimator. All of this knowledge can help anyone complete the form with the best information possible based on their situation.
Why should anyone care about filling out a W-4?
Taxpayers who fill out the irs W-4 form are less likely to wind up with a large tax bill or a giant refund when they file tax returns in 2023—money that could have been invested or spent on essential expenses throughout the year.
Updating your withholding amount is always optional, although the IRS recommends that employees revisit their W-4 forms every year.
Okay, let’s dive into the details, so you can know how to fill out the form.
An employer’s guide to the 2022 W-4
This section explains the biggest W-4 changes employers need to know about.
What do you need to know about Form W-4?
Employees who have not had significant life changes like getting married or having kids have probably not filled out a W-4 in a LONG time. That’s why we recommend that you remind your team about the importance of reviewing their withholdings every year. In addition, any new employees must fill out a W-4.
If that isn’t reason enough to revisit Form W-4, with the passage of the Tax Cuts & Jobs Act (TCJA) in 2017, major changes to employee withholding came to pass. Those changes affected many taxpayers in many ways—and they’re still taking place.
In case you missed some of the changes from the past few years, here are a few of the differences that are still in effect.
1. The Name
Historically, Form W-4’s title was “Employee’s Withholding Allowance Certificate.” Starting in 2020, Form W-4 no longer calculated “allowances,” so the title has been shortened to “Employee’s Withholding Certificate.”
2. Buh-Bye, Personal Allowances Worksheet
That’s right, the Personal Allowance Worksheet from page three of the old Form W-4 disappeared in 2020—and it remains gone.
Why? The TCJA eliminated personal exemptions. These exemptions allowed for deductions against a taxpayer’s personal income, which reduced their taxable income, and therefore, their federal income tax. These exemptions were tied to allowances, but since exemptions are now gone, the need to determine the number of allowances is gone too.
The five steps in the 2022 W-4
Now, let’s dig into each step so you can successfully guide your employees through the W-4 form.
Step 1: Enter Personal Information
This step must be completed by all employees. If an employee does not fill out the form, you are required to calculate their withholding as “Single” so you can withhold their taxes at the higher “Single” rate.
Step 2: Multiple Jobs or Spouse Works
The message before step two gives instructions on where to find guidance for any employees who may be exempt from withholding. If your employee asks, direct them to that language, outlined below.
For step 2, employees only need to complete option (a), (b), or (c). Options (a) and (b) will take employees away from the form itself, while option (c) can be done right on the form.
The IRS has stated that option (a) will give employees the most accuracy and privacy of the three since the new withholding estimator will compute all the relevant entries for the form. Option (b) also provides accuracy but requires manual work, and (c) is the least accurate since it assumes the jobs have similar pay, but it’s the easiest to complete.
Step 3: Claim Dependents
Single taxpayers with a total income of $200,000 or less ($400,000 if married filing jointly) are eligible for the child tax credit. Employees should pay attention to the definitions in IRS Publication 972 – Child Tax Credit if they’re looking to claim the credit.
Step 4: Other Adjustments
This optional section is for various things that an employee may want to account for when considering their withholding. These areas include:
(a): Other income (not from jobs). Additional income that might not be subject to withholding, like retirement income or dividends.
(b): Deductions. This line is for deductions other than the standard deduction. This includes all itemized deductions like mortgage interest and charitable contributions minus the standard deduction. Remember that, in general, the standard deduction reduces a taxpayer’s adjusted gross income to arrive at taxable income. The greater of the standard deduction or itemized deductions will help reduce the amount of tax due. The 2022 standard deduction is $25,900 for married taxpayers filing jointly; $12,950 for single and married filing separately taxpayers; $19,400 for those filing as head of household.
(c): Extra withholding. Any extra withholding that the employee would like to withhold each pay period.
Step 5: Make sure your employee has signed the form
If your employee doesn’t complete this final step, the form is invalid.