How to Fill Out Your W4 Tax Form

Employers normally just hand you the form and you are to fill it out following the fine print instructions. When you follow it word by word, you do not normally grasp what it is trying to do. Let me explain to you it’s intention so that it can be easier to understand and might even save you some money in certain situations.

How’s it going everybody this is beat the bush today i’m gonna show you how to fill out your w-4 form properly so that you do not owe the government any money and that you do not get an excessive tax return at the end of the year this is anywhere that is more than a thousand dollars it’s generally not a good idea because you’re essentially giving the government a

Loan of $1,000 or so for the whole year now if you stick this in the bank instead well you’re gonna easily get a guaranteed of maybe ten dollars or something for that $1,000 for people that accredit card debt this is a really good thing to do because if you fill out your w-4 form properly you’re gonna get a little bit more money back so that at the end of the year

You don’t get that big a refund but whatever extra amount that you get if you have the discipline you just shove that right into your credit card start paying it off and this translates to not paying a lot more interest in your credit card debt which can mean a lot more money than putting it in a savings account where you only earn maybe one point two percent these

Days this amounts to like about 10-12 dollars a year on the other hand if you do what i say and instead of paying 20 percent interest on one thousand dollars this is essentially two hundred dollars of free money so just doing this little bit of money shuffling where you get more money now and less of a refund later then you’re essentially getting free money you’re

Not paying the credit card as much some people actually prefer a large tax refund sometimes because they treat it somewhat like a bonus where they get it and then they think it’s free money so that they can spend it on wherever it wants it’s kind of like a savings program with the government where you’re leaving them extra money and then at the end of the year to

Give it back to you now if you prefer to think this way sure but then for the privilege of having them hold your money you’re essentially losing a little bit yourself in terms of interest instead of the opportunity costs of spending it somewhere else that would save you much more money now before i show you the chart which is really really boring he has all these

Lines tell you instructions after instructions oh do this subtract this from this and then if not had this then do something else before we get into that let me just show you the concept of what this w-4 form is trying do is figure out how much tax liability you have and this differs based on how much deductions you have the deductions means you can lower your

Income by a certain amount and that deduction that part of the income is not taxed at all so then if you look at something like this this is your total income you have a standard deduction here that everyone qualifies for so everyone that earns a certain amount of money this standard deductions get subtracted off of your income so if you earn really really little

Well you won’t get taxed at all the itemized deduction comes in when you have deductions there are various kinds maybe home mortgage interest is one of them and if you add up all this stuff up and it’s more than the standard deduction then you would be better off using the itemized but it’s a little bit more trouble in terms of your taxes so in this graph here if

See also  He Cancelled the Contract (Thank Goodness)

Your total yearly income is this big black thing right here your itemized deduction is this orange thing this gets lopped off and only this part gets taxed so over here you see the tax income this is the portion of your income that’s actually taxed so let’s say you’re at a 25% tax bracket if you tax this whole thing it would be a little bit more right but if you

Just remove the deductions and then you only tax this part then you’re gonna pay a little bit less taxes and the remainder part of it is what you get to keep now the w-4 form tries to anticipate how much taxes you’re going to have to pay at the end of the year and then it sort of does a really rough rounding from what i can see in the forms is roughly in increments

Of 1,000 so it’s either you’re gonna get at zero the most far off it can do is probably $1000 the w-4 form is an estimate of how much taxes you’re gonna owe and there’s a thing called allowances and this is what you’re trying to calculate how many allowances do you have and the more that you have the less taxes that you’re going to pay every single paycheck now you

Can’t just make this up you can’t just go oh i have 20 allowances and then you pay really little taxes because at the end of the year if you end up owing the government a lot of taxes you’re going to have to pay a pen elte honest so it’s best that you try to get it so that you pay them a little bit more than zero most likely you can’t hit it right at zero because

Things gonna change a little bit but you just want to go over it a little bit go over zero but under 1000 generally now this is the w-4 form it has such fine print on it you can barely read this stuff but basically what you’re trying to do is find out how many allowances there are over here at the end you just put one little number over here to show how much tax

That your employer needs to take out every single paycheck now this number roughly goes from 1 to 20 or so usually you’re gonna put something around something between 1 and 10 20 would be a bit extreme now you basically go through this whole form read each one of these and figure out if you apply you can enter one here for yourself if no one else can claim you as

A dependent this means that on someone else’s tax form if they claim you as a dependent then they can take some tax claims on you so if no one else is doing this then you can go ok it’s 1 so this means already over here that this is at least going to be one over here if you’re single and have only one job you can enter one ok over here if you’re married have only

One job and your spouse doesn’t work you can also put a 1 your wages from a second job or your spouse’s wages or the total or both are 1,500 or less which basically means you can have a second job it’s just that you can’t earn more than $1,500 and then if this applies then you can put another one here each one of these allowances means that they’re gonna take less

See also  Uber the Car Value Advance Company | BeatTheBush

Taxes off of your paycheck every time you add another one here i am gonna go to that worksheet in the back where they recommend you to do that if you have itemized deductions something that really confused me the first time i fill this out is that over here in number 7 i claim exemption from withholding for – 2017 and i serve certified that i meet both of the

Following conditions and exemptions exempt means that you do not have to pay taxes now you might go oh yeah you know why don’t i write exempt here so that i don’t have to pay taxes well exempt is for people that has no tax liability for some reason and most people are gonna have to pay taxes and if you’re working for employer you most likely are not exempt and

You’re going to have to pay taxes so don’t come over here and write exempt on here you just leave this empty now i’m just gonna go yes i am head of household at least $2,000 of child or dependent care expenses nope depend number of dependents nope no spouse so one two three over here if your total income is between this and this put one for each additional child

There’s no tax there’s no child i don’t got child’s add lines 8 through g so 1 2 3 so over here i got 3 already however over here is this if you plan to itemize or claim adjustments to income and want to reduce your withholding see the deductions and adjustment worksheet on page 2 reduce your withholding is the key here we want to reduce this amount that is taxed

That’s taking away from your paycheck so you can use it now now this is the second worksheet so i’m just gonna go over here and we’re gonna look at this now over here is trying to quickly find out how much deductions that you’re gonna have over the whole year this is assuming that this is deductions over and beyond your standard deduction over here what they’re

Gonna end up doing is take this deduction divide it by four thousand 50 here so you see this is an increment of 4050 so if you are just slightly under every chunk of this then you’re gonna have to round down instead this 4050 kinda implies that your allowance is in increments of 4050 dollars worth of deductions which means if you’re in the 25 percent tax bracket

Every knotch you change this if you change it up by like one allowance or down one allowance you’re going to change the tax refund that you get back by about one thousand dollars or so this tells me the granularity of this tax form so over here as an example let me just say twenty six thousand three hundred fifty okay as a deduction the deductions you have to

Add up stuff like qualifying home mortgage interest charitable contribution state and local taxes now this is how much state and local taxes that you’re gonna pay in 2017 medical expenses in excess of ten percent of your income a lot of times if you do turbotax and you look at your medical expenses it’s always gonna ask you to go through this exercise of trying to

Figure out how much medical expenses that you have the shortcut is if you know your medical expenses is way under ten percent you don’t even have to do that worksheet because it’s takes a lot of work to go through that worksheet and then find out at the end is like oh okay yeah you only spent like two percent of your medical expenses so you don’t qualify so watch

See also  This Stock Market Collapse is Taking Stocks to ./ | Insane Charts

Out for this ten percent of your income thing and then it goes miscellaneous deductions yes there’s other kinds of deductions and the list goes on and on for the type of deductions that that can add up to this number so i have this twenty six thousand something if i say you know your standard deduction six thousand three hundred fifty and you’re supposed to subtract

These two so i got twenty k over here and then you’re supposed to add in any adjustments to your income negative adjustments i assume and any standard additional deduction so these are you know you just add up adding up more deductions of other kinds not included in this stuff over here so i’m just gonna put nothing add line three and four twenty k enter an estimate

Of your 2017 non-wage income such as dividends or interest now this stuff is non wage income which is in addition to your regular income so dividends or interest most people won’t have that much of it but let’s so let’s just say you know one thousand dollars here so this is basically if you earn any kind of dividends from stocks or interest from those high interest

Yielding savings account then you got to subtract it from your deductions here because basically you’re making more money so now i go $19,000 over here divide the amount by 4050 so it goes into this one two three four times enter the number from the personal allowances worksheet line age so before i said three so add lines eight and nine so then i have a total of

Seven here so you see throughout this whole thing i don’t know why they made it so complicated because they go oh okay deductions right standard deductions subtract the two and then over here it goes more deductions why didn’t they put this over here okay and then it got you to add these two together which you didn’t have to do these two lines didn’t need to be

There if they just kind of moved this over there i guess they might need this dividends and interest thing subtract divide okay so we could have simplified this form if we move this over there and yeah so i guess that’s how i would simplify this over here on the bottom you have a different kind of worksheet for two earners multiple or multiple jobs if you are one

Person and you have multiple jobs then you would fill out this thing that’s more complicated and you got to go through you know these little chart things over here to you know look up how many numbers that you can fill out over here i’m not gonna do this but you get the point here you’re just trying to figure out how much deductions you have so thanks for watching

This overview of the w-4 form i hope this helps you fill it out properly so that you’re not giving the government a big loan throughout the whole year if you’re interested in supporting yourself don’t forget to check out my audible link down in the video description below or you can get a free audiobook and if you’re interested in supporting my channel directly

I have a patreon over here where i give various perks at various contribution levels and as always don’t forget to subscribe to my channel over here click that bell icon next to the subscribe button so that you get a notification whenever i upload a brand new video thanks for watching

Transcribed from video
How to Fill Out Your W4 Tax Form By BeatTheBush

Scroll to top