The W-4: Your Tax Setting

The story: Sam’s W-4

At a new job, Sam fills out a sample W-4 form while someone from payroll explains it.

1. Narrator: Sam is starting a part-time job. Before the first paycheck, payroll asks Sam to fill out a W-4.
2. Adult: This form tells payroll how much federal income tax to hold back from each check.
3. Sam: Can I just have nothing held back?
4. Narrator: That’s called exempt. It only fits if Sam owed no federal income tax last year and expects none this year.
5. Narrator: Even then, Social Security and Medicare still come out. And an exempt W-4 runs out every year.
6. Sam: Too little held back, and I owe in spring. Too much, and I get a refund. And I can change it any time.
7. Narrator: Withholding is paying your tax ahead of time. The W-4 is the setting.

What you’ll learn

1. Paying ahead

   Withholding is paying income tax ahead of time, a bit from each paycheck. In spring, a tax return settles up. If too little was held back, you owe tax due. If too much was held back, the extra comes back as a refund.

2. Refund or more each check?

   Some people like a bigger refund, as a kind of forced savings. Others want more money in each paycheck. Both are choices, and the W-4 lets you pick. A refund isn’t free money: it’s your own money coming back.

3. When exempt fits

   Exempt only fits someone who owed no federal income tax last year and expects none this year. Exempt stops only federal income tax withholding. Social Security and Medicare still come out of each check.

4. Keep it up to date

   An exempt W-4 runs out every year. A new one is due by the deadline on the fact card, or withholding starts again. You can turn in a new W-4 any time, and a second job changes the math.

Key words

refund

tax held back beyond what you owe, paid back to you

tax due

tax you still owe at filing time

exempt

no federal income tax held back (Social Security and Medicare still are)

Common questions

Is a big refund a good thing?

It means too much was held back during the year. Some people like it as forced savings. Others would rather have that money in each paycheck. Both are choices.

Remember this

Paid ahead too little? You owe. Too much? You get it back.

Try it: Try the withholding estimator

1. Open the IRS Tax Withholding Estimator.
2. Walk through it with the sample numbers: Sam, one part-time job, an example $300 a week.
3. Note whether Sam’s example would get a refund or owe.

Walk through the IRS Tax Withholding Estimator with the sample numbers.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• The current W-4 and its instructions

  Source: IRS.gov(opens in a new tab)

• Who can claim exempt, and the yearly deadline to renew it

  Source: IRS Publication 505(opens in a new tab)

• Tax Withholding Estimator

  Source: IRS.gov(opens in a new tab)

• Social Security tax rate (employee)

  6.2%

  Taken from each paycheck up to the wage base; employers pay the same again

  As of 2026

  Source: IRS.gov(opens in a new tab)

• Medicare tax rate (employee)

  1.45%

  Taken from every paycheck; employers pay the same again

  As of 2026

  Source: IRS.gov(opens in a new tab)