How to hack your W-4 form and win at tax time
The W-4 was redesigned in 2020 and is now very straightforward. the new form is simple enough that there’s really no need for hacks. Answer honestly, and there’s a solid chance your withholdings more accurately reflect your financial situation. Remember though, you can update your W-4 form with your employer at any time, so make sure you do that after any major life events, like having a kid, getting married, or receiving a big a** raise.
Tax season blows, even if you’re a HENRY. You have to dig up paperwork and pay attention to your snail mail, and we swear TurboTax is adding screens to their workflow every year. And for your troubles, you may find out that you owe thousands of dollars to Uncle Sam. There’s not a whole lot we can do about the complexity of US tax laws, but there is a surprisingly easy way to reduce the amount you have to fork over every April. It’s called your W-4 form.
What is a W-4 form?
Your W-4 tells your employer how much money they should withhold from your paycheck for taxes. Depending on how you fill out your W-4, your employer can withhold too much or too little. Withhold too much, and you’re more likely to get a tax refund (woo!). However, it means your paycheck was smaller all throughout the year. Withhold too little, though, and you’ll likely owe money come April. The W-4 was redesigned in 2020 and is now arguably more straightforward. You read that right— the federal government actually made something easier for once. Confusing things like allowances were removed (no more entering “0” or”1” and crossing your fingers that you picked the right one), and the head-scratching “head of household” designation is no longer a thing.
How to fill out your W-4
Accurately! With the old form, we had some hacks that helped our clients get their preferred outcome. But the new form is simple enough that there’s really no need for hacks. Answer honestly, and there’s a solid chance your withholdings more accurately reflect your financial situation.
When to update your W-4
You can update your W-4 form with your employer at any time. If you haven’t switched jobs since 2020 or earlier, we recommend hitting HR up for the new form, even if your circumstances haven’t changed. The new form may help increase the accuracy of your withholdings. You should definitely update the form after any major life events, like having a kid, getting married, or receiving a big a** raise.
What about W-2 forms?
Not to be confused with the W-4 form, you receive a W-2 form every year. It tells you how much you made that year. It’s possible to receive multiple W-2 forms in one year if you had multiple employers. Unlike a W-4, you don’t have to fill anything out; you just use the W-2 as a reference when you file your taxes each year. If you’re using DIY software like TurboTax, you’ll need your W-2 shandy. If you hire an accountant, you’ll need to provide them with the forms. Happy taxing, HENRYs!
Stash Wealth provides financial plans designed to assist high earning young professionals build and manage their wealth.
Stash Wealth offers a pragmatic approach to financial planning and wealth management. Whether saving up for Tahiti or a Tesla, we help you achieve your short-term and long-term goals.
Written by Priya Malani
Stash Wealth, Founder & CEO
Priya is a force in the personal finance space. As an industry disruptor, she specializes in bringing the unapproachable world of money to young professionals across the country.
