Categorized | Taxes

How to Fill Out A W-4 For A Recent Graduate

This post is part of a three post series which walks a recent graduate through filling out their W-4 and filing their taxes. After these three posts, recent grads should be squared away with Uncle Sam come April.

Post 1: How To Fill Out A W-4 For A Recent Graduate
Post 2: How To Figure Out Taxable Income for a Recent Graduate
Post 3: How to File Your Taxes for a Recent Graduate

Getting the Job

Since April is right around the corner I decided to write a post to help any recent graduates who are about to sit down and do their taxes. I remember when I first sat down the January after graduation and went to file my taxes… it was a good bit different than when I was making substantially less while a full-time student. This is meant to be a short-and-sweet post, right down to the point.

Taxes do not need to be difficult and hopefully this gives you some guidance. However, as I can not possibly give advice in regards to your exact circumstance, you should make sure to check resources at the IRS website to ensure you are filling this out correctly. You can also contact your HR contact or a tax professional.

Before we discuss how to file taxes, though, we should start at the beginning. This is the part a lot of people rush through in the new employee orientation: Filling out the new-hire packet and the accompanying w-4 form. If it still doesn’t sound familiar its usually thrown in with all that paperwork on the sexual harassment policy and the company’s market standing. If this still doesn’t ring a bell, this step happens somewhere between you getting an offer letter and your first day at work :). Congrats on the job, btw.

Filling out the W-4

I would go ahead and print a Form W-4 [PDF] to follow along with the post. The first section you need to fill out, pictured below, is the “Personal Exemptions Worksheet.” For most new graduates, you will put a 1 for A and a 1 for B, meaning H will be 2. BUT you should check with your parents and make sure they are not claiming you as a dependent before you put 1 for A. This is doubtful, but I would make sure.

Personal Exemption Worksheet

(Click to enlarge)

The next section is the “Employee’s Withholding Allowance Certificate.” Here you actually are putting down how many exemptions you want to file. As you see, box 5 asks for the number that you placed in H on your worksheet. Generally, the words of advice for a recent graduate are that if you claim 2 allowances you will probably owe the government money at tax time. If you claim 0 allowances you will be giving the government an interest free loan as you will be overpaying by a significant amount. Please note that 0 is not the same as exempt! Exempt means they will not take any taxes and 0 means they will take out the maximum. So, if you want to be safe put down 1 allowance. If you would like to use an IRS calculator to assist you, go here.

Witholding Allowance Cert

(Click to enlarge)

Take Advantage of the Part-Year Method

One other thing that I am glad I researched on my own when I started my new job was the Part-year method. My HR representative did not tell me about this even though I was starting my job in June. Essentially, let’s assume you have accepted a job that pays $50,000/year (congrats again!) but your job starts in June. You are only working half a year at this rate, in essence earning $25,000/year, but the government is taxing you at the higher bracket for people who earn $50,000/year. Again, you are giving them an interest free loan! So what can we do? Apply for the part-year method. Here is a document from the IRS that outlines the Part-Year Method [PDF] on page 8.

To make it simple, they have 2 stipulations to use that method

  • You must use a calendar year for your taxes, not a fiscal year
  • You cannot be employed for more than 245 days in the year, which includes weekends, sick days, vacations, and short term layoffs

Go to the document to get more information. The goal is to limit the taxes they take to what you actually owe, you don’t want to overshoot OR undershoot!

Wrap-Up

I hope this helps you fill out your w-4 for any recent or upcoming graduates. Proper tax planning allows for more accurate and effective budgeting practices and investment opportunities.

Next week I will take this information and go through the start of the tax filing procedure with you!

Leave some comment love if you have any questions or comments (especially if you remember being a recent grad and have some useful information to pile on in regards to filling out the w-4)!

Recommended

My Life ROI recommends filing your taxes with TurboTax Federal Free Edition for ease of use, accuracy, speed, and… it’s free!

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MLR is passionate about saving for his future while maintaining a high quality of life. He currently resides in a great town, has a wonderful girlfriend, adopted the cutest puppy ever, and works for a Fortune 500 company.


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12 Comments For This Post

  1. Roger Says:

    Interesting stuff. Very helpful. It does make me wonder how much I will owe on taxes, as I was taking two exemptions on w-4 at my last job.

    [Reply]

  2. MyLifeROI Says:

    There are so many influencing factors… and you have been out of school for a little longer, right?

    And why you waiting to do them!?

    [Reply]

  3. Roger Says:

    ‘And why you waiting to do them!?’

    Partially, I’ve just been busy lately, working part time, looking for full time work, starting up a PF blog and spending time with my family and girlfriend all take up time. Partially, I’ve been waiting for all the tax information to come in earlier this month. And partially, I tend to naturally procrastinate, which is never a good thing and is really hurting me in this case.

    Today’s the day, though; I’ll have them written up by this time tomorrow, ready to be sent out on Monday (or perhaps delayed a bit if it turns out I owe money…)

    [Reply]

  4. Sallie's Niece Says:

    I’m a little confused by this advice. I just started a new job and had to fill out a W4. I ended up getting a 2 on the H line (like you calculated) but thought this meant I should put 2 under number of allowances (like the form says). But then a friend said I’m not officially a “head of household” if I’m single and live alone. I think I had put 2 down on my last W-4 and didn’t owe any taxes (in fact I got a small refund) but I wanted to make sure what the right thing to put on my form. My HR rep wasn’t any help unfortunately. Maybe I should try the IRS calculator.

    [Reply]

  5. MyLifeROI Says:

    @ Sallie’s Niece –

    Yeah, as I mentioned most people will get a 2 on line H. And that does mean you “should” put a 2 under the number of allowances. Your friend may be confused in regards to the “head of household” comment.

    Are you making the same amount of money as you were with your last job (or in the same bracket) with the same amount of deductions? If so, and you put 2 at your last job and got a small refund, then I see no problem with putting a 2 at your new job. Putting a 1 would mean you get a larger refund, which is of no benefit to you.

    Definitely use the IRS calc. and that’s unfortunate that your HR rep wasn’t help :(

    MLR

    [Reply]

  6. yesan Says:

    Can you fill out a W-4 form if you’re an immigrant? And what happens if you write down a false Social security number?

    [Reply]

  7. AB Says:

    Thank you so much for breaking this down for me! I’m a recent grad and I’m a little overwhelmed to say the least… Has anyone else found any other helpful personal finance blogs that can help during tax season? So far I’ve been really impressed with this one and Green Sherpa http://blog.greensherpa.com/index.php/personal-finance/exemption-redemption/

    Anyone else got any other suggestions?

    [Reply]

  8. tax forms 2010 Says:

    If your child tax credit is zero, you didn’t pay any tax, so your rebate is $300 for yourself and another $300 for your spouse if you filed a joint return, plus $300 for each child under age 17.

    [Reply]

  9. Rosbel Says:

    Hi!!

    I know you wrote it more than a year ago, but I just found it and it helped me, but as I started working in July I would like to use the part-year method but the document says that to apply I must ask my employer, so is that all; doesn’t it exist a field or something I fill out?

    Thanks.

    [Reply]

  10. sportske Says:

    This is really fascinating, You are a very skilled blogger. I have joined your rss feed and sit up for in the hunt for more of your wonderful post. Also, I’ve shared your web site in my social networks

    [Reply]

  11. Ellilou Ilano Says:

    For fillable W-4 form you can check this website http://www.pdffiller.com/en/search.htm?v=new&utm_expid=2952066-78.7pZw6OH0QCmBfYbPZcDJag.1&s=5&q=employees%20withholding%20allowance%20certificate

    Fill out and sign your form online. You can also print the forms that you have filled out, email, save and even fax it online.
    Ellilou Ilano´s last [type] ..Find fillable PDF forms

    [Reply]

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I'm MLR. After graduating from college debt free, I decided to write a blog encouraging people to adapt responsible and sensible personal finance rules.


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