What is a W-4 form? What are tax withholdings?

February 21, 2019

Quick Answer.

A W-4 is a federal form used to estimate your taxes and determine how much your employer should withhold (or keep) to pre-pay your taxes. Employers are required to collect a W-4 form from all new employees and employees are able to update their W-4 at any time. The form will ask for all your incomes (e.g. salaries, investments, side-hustles) and anything in your life that lowers your tax bill. For example, kids (or other dependents), retirement contributions, charitable contributions, and other forms of interest payments (student and home loans).

Over time, it's necessary to make updates to your W-4. Especially, when you have been with a particular employer for a long period of time. It's good practice to update your W-4 every couple of years. It's particularly important to update your W-4 in the following situations:

  1. You welcome a new family member (new dependents lower taxes)
  2. You help your parents or other people financially (new dependents lower taxes)
  3. You make a significant change to your retirement contributions (lowers your federal and state taxes)
  4. You bought a home with a mortgage (some or all interest on your home is tax-deductible)
  5. You have a significant change in income (your taxes will increase, it’s a good problem to have 😎)

To fill out a new W-4 form just click here: IRS W-4 Form.

This is why (it matters).

  • Federal and State governments need income throughout the year. Your withholdings are used to pre-pay for your Federal and State taxes each pay period.
  • Depending on your withholding you will owe taxes or get a refund. At the end of the year, through your tax return, you settle with the Federal and State tax authorities. Depending on how much your employer has pre-paid on your behalf (your withholdings), you will either owe taxes or get a refund.

Go further.

  1. Estimate your required Withholdings. If you want to go into more detail, the IRS provides a tool to estimate your end-of-year tax credit or refund. To use the tool, just click here: IRS Tax Withholding Estimator
  2. Read What are paycheck deductions? How do I update them?
  3. Use the Mogami App to scan your paystub and get a breakdown of your withholdings and calculate your Take Home Pay.
  4. Take a closer look at your paystub. You can see how much is being withheld and for what purpose on your paystub. Keep in mind that each employer has different tax codes. Some can be very cryptic. Here are a few examples.

Oregon Paystub Tax Table. It includes FITW, MED< OR, ORWC-E, SS taxes in amounts per paycheck and year-to-date.
Oregon Paylocity Paystub Tax Section

Washington Paystub sample Deductions Table. It includes Federal Income Tax, SOcial Security, Medicate, WA Paid Family Leave Ins, and WA Paid Medical Leave. It shows the amounts per paycheck and year-to-date.u
Washington ADP Paystub Tax Section (amounts on right are year-to-date)

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