IRS Form W-4 is used by employees to provide information to their employer to determine the amount of federal income tax withheld from each paycheck. Employers are required to use the information you provide on the W-4 to determine federal withholding according to formulas and tables from the IRS. The accuracy of the information you provide determines how accurate that withholding will be.
What is withholding?
Withholding is an estimated prepayment of the taxes you owe on your annual income tax return. The determination of your tax bill is made by totaling your annual taxable income from all sources and applying the allowable deductions unique to your situation. The net result is applied to a progressive tax formula to calculate your annual income tax. Then tax credits and estimated tax payments (including withholding) are applied to determine if you will get a refund or have to pay.
You can revise your Form W-4 at any time. You should keep a copy of your Form W-4 you provide to your employer in case you need to revise it later. IRS has a Tax Withholding Estimator Tool to help you see the effect of revisions to your Form W-4.
With the passage of the OBBB, several new deductions are available. You can increase your take-home pay by providing your employer with an updated Form W-4. The new deductions include:
- Increased senior deduction
- No taxes on tips
- No taxes on overtime
- New car interest
- Cash gifts to qualified charities up to $1,000 ($2,000 if MFJ)
- Increase in SALT limit (itemized deductions only, beyond the scope of this post)
If you anticipate taking any of these deductions on your 2026 income tax return you will file in 2027, you can provide your employer with a new Form W-4 after completing the worksheet on Page 4 of the form. This will increase your paycheck each pay period by reducing the amount of federal withholding. It will also reduce your refund come tax time.
The worksheet on Page 4 of the Form W-4 looks complex because it applies to all tax situations. However, if you’re among the 85% of taxpayers who do not itemize, the form doesn’t need to be too daunting. Just complete the Page 4 worksheet Lines 1 through 5 and Line 12. Add Lines 2, 4, 5 and 12 and enter the total in Step 4(b) on the first page of the Form W-4. Complete Step 1, Step 3 if you have dependents, sign in Step 5, and give the completed Form W-4 to your employer.
Changing your withholding does not change how your income taxes are calculated at tax time. Some people prefer paying too much in each year and getting a large refund. Some people use excess withholding at work to pay the tax on other sources of taxable income (the purpose of Step 4(a) and Step 4(c) on the Form W-4). If the vast majority of your income comes from work, you can keep more of your money throughout the year by completing an accurate Form W-4. Why let the government use your money for free and tie it up until next Spring?