Remember when you got your first job? Getting that first paycheck was AWESOME.  It may have been 50 years ago; it may have been only yesterday, but, associated with it was that pesky task of filling out a W-4.

As a beginner (first pay check experience) many first-time employees have questions about the W-4 and, with implementation of the Tax Cuts and Jobs Act, all employees have been advised to review the allowances they report on a W-4 so here are a few answers.

  1. What is a W-4? The Employee’s Withholding Allowance Certificate is a form, including a worksheet, that tells how much tax should be withheld from a pay check. Every time payroll is run, a piece of each paycheck— the withholding tax — is withheld by the employer and sent directly to the federal government in your behalf.
  2. What is an Allowance? Basically, allowance is an exemption people can claim that then influences how much is 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. The more allowances claimed, the less money is taken out of a paycheck (take-home pay bigger). Claim “0” and the maximum allowed will be taken out (take-home pay smaller)
  3. What is best? A bigger pay check is not always better. The amount of withholding is credited towards tax due each year. If enough is not withheld, there will be a balance due the IRS at tax time. If too much is withheld, the IRS will owe the taxpayer a refund. The key is to find the right balance.

It is never a bad time to review your W-4 allowances to be sure your pay check is not too big nor too small. Just a tip from Stapley Accounting, your QuickBooks and payroll professionals.