Income Taxes

You can’t avoid Federal Income Taxes while working in the United States (and in some states, state income taxes). So you will have to fill in some forms on the first day of work.

What is Form W-4

The form’s purpose is to help you pay your taxes as you earn your salary. Here’s what the instructions on the form actually says.

Complete Form W-4 so that your employer can withhold the correct federal income tax from your pay. If too little is withheld, you will generally owe tax when you file your tax return and may owe a penalty. If too much is withheld, you will generally be due a refund. Complete a new Form W-4 when changes to your personal or financial situation would change the entries on the form.

The idea is to avoid paying a penalty, but to minimize paying too much, since the US government does not pay interest on the money they withold from you.

Simple Instructions

If you don’t have significant non-salary income (less than $1000 a year), you can probably just fill in the IRS Form W-4 with your correct dependent information and follow the directions, without adding any dependents or asking for extra taxes to be removed.

Making it Harder

If you have significant non-salary income, you can ask the US government to withold extra money from your paycheck. If you were to make 20% of your yearly salary on investments, you might benefit from properly filling in form W-4 to pay extra taxes in each paycheck. Otherwise, you may owe a penalty after filing your 1040 at the end of the year. OR you will have to start paying 1040ES estimated quarterly taxes to avoid paying penalties.

Please consult a tax professional regarding your best choices for filling in your W-4. You can resubmit a W-4 at any time, so changing your mind after you start your job is just fine.