Taxes
What each step of the W-4 does, why allowances are gone, and how to fix withholding with two jobs, a working spouse or a large bonus.
1
A large refund is not a bonus. It is a year of interest-free lending to the government.
2
Allowances no longer exist. The current W-4 works in dollars, not in a number of exemptions.
3
Step 2 is the one that matters. Skipping it is why two-income households owe money.
4
Each employer withholds as if its job were your only income, which is why multiple jobs underwithhold.
The most common causes are a second job or a spouse starting work without Step 2 of the W-4 being completed, a bonus withheld at the flat supplemental rate while your marginal rate is higher, self-employment or...
Run the IRS Tax Withholding Estimator, then reduce withholding using Step 4(b) deductions or by lowering any extra amount in Step 4(c). A refund means you overpaid all year with no interest.
Read the full guide