As an employer, you need to withhold income taxes from your employee’s earnings each pay period. But how do you know how much to withhold?
Form W-4 gives you the information you need to ensure accurate withholding for each of your employees. But Form W-4 went through some changes back in 2020—and your employees may have questions about how to fill it out.
Let’s take a deep dive into the W-4 form: what it is, why it’s important, and how your employees can fill it out accurately:
What is a W-4 form?
The W-4 Employee’s Withholding Certificate is a tax form (available on irs.gov) that allows employees to elect how much income tax is withheld from their paychecks.
Here’s how it works: an employer gives Form W-4 to the employee. The employee determines how much they want withheld from their earnings, fills out the form accordingly, and gives it back to the employer. The employer then uses that to determine the tax withholding for that employee and deducts the appropriate amount each pay period.
All new employees have to fill out a W4 form when they’re hired—and if they want to change their withholdings, they can resubmit a new W4 form at any time.
Why is form W4 important for employees and for employers?
From an employee perspective, Form W-4 allows your team to control the amount of income tax that’s withheld from their paychecks. That can help employees avoid underpaying (which can result in a huge bill come tax time) or overpaying on their taxes (which can leave them with less take-home pay throughout the year than they’re entitled). Employees can also see how much is being withheld from their earnings on their pay stub—and again, if they want to adjust their withholdings in either direction (and have more or less withheld), they can resubmit a new form at any time.
As an employer, not only does having an up-to-date W-4 for each employee help you determine how much to withhold each paycheck, but you also want to have them on file for tax purposes. While you’re no longer required to routinely submit W4 forms to the Internal Revenue Service, they reserve the right to request “copies of Forms W-4 for certain employees in order to ensure that the employees have adequate withholding.” So, if the IRS comes knocking, you definitely want to have the copies they’re requesting.
Form W-4 changes for 2020 (that still apply today)
In 2020, the IRS released a new Form W-4 for 2020 with two key changes. The first is the form’s title. Form W-4 used to be titled “Employee’s Withholding Allowance Certificate.” But in 2020, that title was shortened to “Employee’s Withholding Certificate.”
And that title shortening is a result of the other key change to Form W-4. Prior to 2020, employees used W-4 to claim withholding allowances. The number of allowances determined how much income tax was withheld from each paycheck; employees who claimed fewer allowances had more tax withheld from each paycheck, while employees who claimed more allowances had less tax withheld each pay period. The value of these allowances were, in part, based on personal exemptions.
But a 2017 tax bill, the Tax Cut and Jobs Act, eliminated personal exemptions—and so Form W-4 also eliminated allowances. Now, instead of employees figuring out the right withholding allowances (which proved confusing for many), the new Form W-4 has employees fill in the relevant information to determine accurate tax withholding (like filing status, number of dependents, and additional income)—and then the employer does the calculations from there.
How to fill out a W4 form
Now that you understand what a W-4 form is, why it’s important, and the changes that were made to it in 2020, let’s jump into how to fill it out. That way, you can guide your workers through the process—and make sure you have the information you need to accurately calculate their tax withholdings.
All employees must complete steps 1 and 5 on Form W-4. Steps 2, 3, and 4 only need to be filled out if they apply to the employee. Note: only employees hired in 2020 and beyond need to fill out the revised Form W-4. Employees hired prior to 2020 will have their withholdings computed based on their most recent Form W-4.
Step 1: Personal Information
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Any employee filling out Form W-4 will need to fill in their personal information, including:
- First name and middle initial
- Last name
- Social security number
- Address
- Filing Status: Single or Married and filing separately, Married and filing jointly, or Head of Household
Step 2: Multiple Jobs or Spouse Works

If an employee has more than one job or they’re married filing jointly and have a working spouse, they’ll need to fill out step 2.
If your employee works other multiple jobs, they would check the box next to section 2(c) and complete the Multiple Jobs Worksheet. Depending on the number of jobs the employee and/or spouse holds, they can fill out the worksheet as follows:
Line 1
If the employee has two jobs or they’re married filing jointly and their spouse also has a job, the employee should fill in Line 1 of the worksheet by using the withholding tables on page 4 of Form W-4, which have columns for the highest paying job on the left and the lowest paying job on the right. Employees should find their wages, cross reference the highest and lowest paying jobs, and enter the number at the intersection into Line 1.
Line 2
If the employee and their spouse have three total jobs, the employee will need to fill out Line 2a, 2b, and 2c on Form W-4.
Line 2a
Using the same process as we just covered for Line 1, employees should cross reference their highest paying job and second highest paying job and enter the number at the intersection into Line 2a.
Line 2b
Then, they should add the wages from the two jobs from Line 2a and use them as the “Highest Paying Job,” cross reference with their wages and salary from their third job, and enter the number at the intersection into Line 2b.
Line 2c
The employee should add Line 2a and Line 2b and enter the total on Line 2c.
Once an employee has completed Line 2, they can move on to the rest of the worksheet. Just keep in mind that while employees should fill out a W-4 form for each of their jobs, they should only complete steps 3 through 4(b) for their highest paying job (they can leave those sections blank on their other W-4 forms).
Step 3: Claim Dependents

If an employee has dependents, they’ll need to complete Step 3, which determines their eligibility for the child tax credit.
Any employee filing single with an income of $200,000 or less—or an employee that’s married filing jointly with a combined income of $400,000 or less—can claim dependents on Form W-4.
If employees have children under the age of 17, they should multiply the number of children by $2000 and enter it into the first box on the worksheet. For all other dependents, they should multiply by $500 and enter into the second box. Then, they should add the values from the first and the second boxes and enter the total into Line 3.
Step 4: Other Adjustments

Step 4 is for any other adjustments your employee would like to make to their federal income tax withholding.
There are three sections employees can choose to fill out under step 4, which include:
- Line 4a: Other income (not from jobs). If your employee has additional income that isn’t subject to withholding (including interest, dividends, and retirement income), they can enter that income on Line 4a and elect to have the additional amount withheld from their earnings to compensate.
- Line 4b: Deductions. If your employee expects their deductions to exceed the standard deduction, they would fill out the Deductions Worksheet on page 3 of Form W-4 and enter the result on Line 4b.
- Line 4c: Extra withholding. If your employee wants to have additional tax withheld each pay period, they can enter the withholding amount on Line 4c.
Step 5: Sign the form

Form W-4 is only valid if it’s signed and dated by the employee. Make sure your employee both signs and dates their W-4 form before submitting it to management or human resources.
Understanding Form W-4 helps your employees better manage their tax situation
Filling out Form W-4 can be confusing for your employees. But now that you have a better understanding of Form W-4 and the changes made to it back in 2020, you can walk your employees through the process, help them better understand how to accurately fill out the form, and ensure they’re having the right amount of income tax withheld from their paychecks.
1. Introducing Yourself
Your introductory email needs to pack a lot of information into a small package. Try something like this:
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Hello Jane,
My name is John Doe and I work for ABC Agency, where we provide business insurance policies to many of Dallas' rockstar small businesses.
Congratulations on your new business, Jane's Bakery. Are you wondering if you have all the insurance you need? Or if your policies will really cover you in a pinch?
At ABC Agency, we pride ourselves on providing robust, comprehensive coverage options to companies like yours with flexible, pay-as-you-go plans.
Are you available this week to talk more about how we can help? I can help you find the most affordable rates and the best policies out there.
I look forward to speaking with you soon.
Cheers,
John Doe
2. Presenting a Quote
Once you've met with your potential client, a quick reply with their quote will get the ball rolling.
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Hi Jane,
Thanks so much for meeting with me this morning. I loved touring Jane's Bakery–I can still smell those delicious chocolate chip cookies baking! You have a great location, and I'm sure you're going to do great on Front St.
After reviewing my notes, I've pulled together an insurance quote for you (attached). I recommend a business owner's policy. A BOP includes several insurance products in one: liability, property insurance, and business interruption insurance. It offers robust coverage at a competitive price.
I'll call you in a few days to see what you think about this insurance plan. In the meantime, if you have any questions, don't hesitate to email me or call me at [phone number].
Again, thank you for your time today. I look forward to working with you in the future.
Cheers,
John Doe
3. Thanks for Purchasing a Policy
Gratitude is important! It's never a bad idea to thank your clients for their business.
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Hi Jane,
Thank you for choosing a business owner's policy with ABC Agency. We know it's so important to get the right coverage for your business, and we are honoured you've placed your trust in us.
We're excited to work closely with you, and our no. 1 goal is to make sure you're business is always protected.
Do you have any questions? We are here to help. Reach out whenever something comes to mind.
Thank you again for choosing ABC Agency to insure Jane's Bakery.
Cheers,
John Doe
4. Welcome Email
A welcome email helps clients feel like you're there to help–and can softly pitch other insurance products you offer.
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Dear Jane,
Welcome to the ABC family! We are thrilled to have you as a new customer and can't wait to meet all of your insurance needs.
As an independent insurance agency, we work with multiple insurance providers to find the best coverage options for all our customers. If you need any other type of insurance–like [include additional offerings unique to your agency, like life insurance, health insurance, home insurance or anything else]–we can help you too.
Do you want to discuss any of these policies?
Cheers,
John Doe
5. Introducing a New Product
A happy client may want to expand their business with you.
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Hello Jane,
I hope all is well with you and Jane's Bakery. I stopped in yesterday for a blueberry muffin and coffee, and they were delicious. I loved the hint of cinnamon in the muffin! Was that your idea?
I wanted you to be the first to know we are now offering commercial vehicle insurance to our policyholders. Auto insurance for your catering vans is super important since your personal car insurance won't cover them.
We're offering this insurance coverage solely to our current business clients at the moment and have some very competitive rates.
Would you like me to work up a quote for you?
As always, thanks so much for being a part of the ABC family.
Cheers,
John Doe
6. Asking For Referrals
Once your relationship is established and comfortable, let your clients help you grow.
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Hi Jane,
You've been a valuable member of the ABC family for two years now, and we so appreciate your business–not to mention the muffins you supply for our monthly meetings!
Because you are a valued policyholder, I wanted to ask a quick favour. I know you are active in the local Chamber of Commerce, and I'm hoping you might know some colleagues who would benefit from working with our insurance company.
Referrals are one of the most effective ways to connect with our community since people really trust their friends, family and colleagues. Is there anyone you'd recommend I speak with?
Remember that in addition to business insurance products, we offer everything from life insurance policies to pet insurance.
As a thank you for your help, we will send you an Amazon gift card of $100 when your referrals buy insurance from us.
Thanks so much for your help!
Cheers,
John Doe
7. Policy Renewal
If your client needs to renew their policy with you, send an email like this:
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Hi Jane,
I hope you're doing well! What a year it's been—from being listed as one of the top 5 bakeries in Dallas to being an official vendor for the city—you have so much to be proud of.
Just a heads up that your business owner's policy is up for renewal soon and will expire on June 15, 2023.
If you're still happy with the coverage, we can easily renew it for you.
Do you have some time to chat this week?
Looking forward to serving you again!
Cheers,
John Doe