As an employee, your employer will require you to fill out an IRS Form W-4 to calculate how much money to withhold from your paycheck for federal income taxes. The amount withheld depends on your marital status, number of dependents and jobs, and other deductions you claim on your W-4.
To maximize your withholdings, you must complete the form accurately to let the IRS keep as much money as possible to give back to you at the end of the tax year. You can withhold more money from your paycheck if you want a bigger refund by entering an amount in box 4(c).
Fill Out W-4 for Maximum Withholding: Filing Status
The IRS has five filing statuses as of February 2023: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow or Widower with Dependent Child.
Most taxpayers in the United States fall into at least one of the first four categories, provided they meet the respective requirements. Some, such as married individuals, may qualify for more than one.
The filing status on your Form W-4 determines the amount of money your employer will withhold for federal income taxes. When filing your Form W-4, it is critical to know which filing statuses you qualify for, then select the filing status you expect to file your tax returns with on your Tax Form 1040.
What happens if I fill in the wrong filing status on my Form W-4?
Your tax liability may vary depending on your filing status. If you qualify for multiple filing statuses, you can choose whichever benefits you most. For example, if you are married, you can select “Married Filing Jointly” or “Married Filing Separately,” the latter of which is the same as filing as a single, unmarried individual. However, some of the statuses you qualify for may result in smaller tax refunds than others.
If you choose a filing status you aren’t qualified for; the IRS recommends filing a new Form W-4 with your amended filing information as soon as possible. An example of a filing status you may not qualify for is selecting Head of household when you have no qualifying dependents.
Choosing a filing status you do not qualify for may result in fewer taxes being withheld than is legally required. If this happens, you may face increased scrutiny from the IRS, a tax bill for the amount you owe, and a $500 penalty.
Which filing status should I select for a maximum refund?
In most cases, the status that gives you the lowest tax liability will result in the highest refund. Your marital status, dependents, and other factors determine the filing status you choose.
For example, while married taxpayers can choose to file separately or jointly, most couples file jointly to benefit from the potentially lower tax brackets. However, selecting the “married filing separately” status can be more beneficial in specific situations, such as when filing jointly would put them in a higher tax bracket for the tax year. This situation commonly occurs when both spouses are high earners and have the same or similar salaries.
In most cases, select your actual and true filing status as this will provide the most security from IRS penalties and provide a good base for the maximum refund you qualify for.
Fill Out W-4 for Maximum Withholding: Multiple Jobs or Spouse Also Works
If you work multiple jobs or are married, filing jointly, and you and your spouse both work, the accuracy of your tax withholdings depends on the number of total jobs per household.
This section does not apply to you if you don’t work multiple jobs or aren’t married and filing jointly.
What should I do for step 2 on a W-4 for maximum withholdings?
- If you work multiple jobs, the accuracy of your tax withholdings primarily depends on the number of jobs worked and the income earned in each.
- If you work two jobs and the lower paying job pays more than half your higher paying job, check the Step 2(c) box on both of your W-4s, then fill out Fields 1, 3, and 4 in Step 2(b) on the Form W-4 corresponding to the highest paying job.
- For three or more jobs, refer to the Multiple Jobs Worksheet on Page 3 of the form and fill out Fields 2a, 2b, 2c, 3, and 4 in Step 2(b) on the W-4 for your highest paying job.
Filing MFJ and Spouse Also Works
- If your filing status is Married Filing Jointly and you and your spouse work, your tax situation counts as multiple jobs per household. As with single taxpayers with multiple jobs, the accuracy of your withholdings mainly depends on the income earned and the number of jobs worked.
- If each spouse works one job, check the Step 2(c) box on your W-4 and ensure your spouse does the same. Afterward, select the W-4 for the highest paying job and fill out Fields 1, 3, and 4 of Step 2(b).
- If there are more than three jobs in your household (one or both spouses work more than one job), use the Multiple Jobs Worksheet on Page 3, select the Form W-4 for your highest paying job, and fill out Fields 2a, 2b, 2c, 3, and 4 of Step 2(b).
Fill Out W-4 for Maximum Withholding: Dependents
Step 3 of Form W-4 allows you to claim tax credits for your dependents if your total annual income is $200,000 or less or $400,000 or less if married filing jointly. If you want to maximize your tax withholdings, you may choose not to claim child tax credits, non-child dependent credits, or any other qualifying tax credits.
How should I fill out W-4 for maximum withholding if I have:
If you have no dependents, put 0 in all three fields.
Even if you have a qualifying dependent, such as a child under the age of 17 or a qualifying non-child relative, you may opt not to claim them on your W-4 to maximize your withholdings by entering 0 in all three fields in Form W-4 Step 3.
Follow the same steps as if you only had one dependent and fill in 0 in all three fields of Step 3.
Fill Out W-4 for Maximum Withholding: Other Income
If you freelance or collect interest, dividends, or retirement income, you may want to withhold more from your paycheck to ensure you don’t owe taxes. Making $600 or more during the fiscal year from these activities will require you to pay taxes on that income.
To withhold the maximum amount on your W-4, fill in step 4(a) with the amount of other income. If you make $10,000 this year from other income sources, you are in the 22% tax bracket, and you are paid bimonthly, then you should put $92 on line 4(a) (10,000 * 0.22 / 24 = 91.67).
1099 Contractor - Inc. Uber, DoorDash, etc.
As a 1099 worker, you can have the tax you owe on your freelancing money withheld on your paycheck rather than paying quarterly estimated taxes.
Selling stocks for a profit is taxable income that you can also pay with money withheld from your paycheck. If you plan to sell stock during the year, update your W-4 to include the taxes you expect to pay.
Side Business or Freelance Work
As with 1099 contractors, freelancers and individuals working side businesses should expect to receive a Form 1099 from their employers. If this situation applies to you, verify the total income earned from these sources. If it exceeds $600, you can use line 4(c) on your W-4 to withhold the taxes you expect to pay on your income.
Social Security Benefits
Depending on your benefits, some may count as additional income, meaning you may owe taxes. You can record the amount you want your employer to withhold from your paycheck to pay for these taxes by using line 4(c) on your W-4.
Alimony payments are considered taxable income by the IRS. If you receive alimony payments, you can withhold additional income from your paycheck for federal tax purposes by recording the amount you want withheld on line (4c).
Withhold the Exact Amount You Want
Step 4(c) of Form W-4 allows you to specify an additional amount you want your employer to withhold for taxes. Extra withholdings will reduce your tax savings and the amount of take-home money you receive in your paycheck. While doing so is optional, it may result in a larger refund at the end of the tax year.
Example: If you want to save up $3,600 and are paid bimonthly, you should withhold an extra $150 on your W-4. The $150 will be added to your federal tax amount each paycheck, so when you receive your tax refund next year, it will be $150 multiplied by 24 pay periods: $3,600.
Use the IRS Tax Withholding Estimator
If you have a job that regularly takes federal taxes out of your paycheck, you can use free tax software, such as the IRS Tax Withholding Estimator, to determine what information to put on your W-4.
This tool is not meant for those who only receive income from a pension, have nonresident alien status, or have a complex tax situation due to the Alternative Minimum Tax (AMT), long-term capital gains, or qualified dividends.
Here are the answers to some common questions about correctly completing form W-4 to receive the biggest refund at the end of the year.
It is impossible to max out federal withholding because the amount of federal taxes withheld from your paycheck is determined by the information you provide on your W-4 form and the IRS tax tables, which are based on your income and filing status.
If too much federal tax is withheld from your paycheck, you will receive a tax refund when you file your tax return for the year.
Yes. If the IRS owes you a tax refund at the end of the year, they may also owe interest, according to law, regarding interest on overpayments (26 USC 6611). The interest rate is equal to the federal short-term interest rate plus 3%, per 26 USC 6621.
There is no single standard withholding rate for a single taxpayer. The rate is calculated depending on the wages earned and whether you checked the box in Step 2(c). They vary from $0 for the lowest earners to $3,350.81 + 37% of every dollar earned over the first $11,384. Refer to the Standard Withholding Rate Schedules table for more information.
As with single taxpayers, there is no single standard withholding rate for married couples. The rate varies depending on the wages earned. The Standard Withholding Rate Schedules table indicates it may range from $0 to $3,588.39 + 37% of every dollar earned over the first $13,874.