The W-4 and your first paycheck

What the W-4 does

Form W-4 tells your employer how much federal income tax to hold back from each paycheck and send to the IRS for you. The form changes only how your tax is paid along the way, while the amount you owe for the year stays the same. At tax time, the return you file settles any difference as a refund or a balance due.

Many states have their own withholding form, and your employer will hand it to you with the W-4 when the state taxes wages. The IRS website offers a Tax Withholding Estimator that walks through the same questions if you want a second check.

Filling it in step by step

Step 1 asks for your name, address, Social Security number and filing status, and most students choose single. Step 2 is for people who hold more than one job at once or have a working spouse, so withholding covers all the pay together. Steps 3 and 4 cover dependents, other income and extra deductions, and many students with one job leave them blank.

Step 5 is your signature and the date, and an unsigned form is treated as though you chose single with no adjustments. If you owed no federal income tax last year and expect to owe none this year, you can write that you are exempt, which stops income tax withholding. That claim lasts only for the calendar year, so you would hand in a fresh W-4 early the next year to keep it.

Reading your first pay stub

Your pay stub starts with gross pay, which is your hours multiplied by your hourly rate, and then lists each deduction. Federal income tax usually comes first, followed by any state or local income tax. Social Security and Medicare, often grouped together as FICA, come after that.

Students who work for the college where they are enrolled and attending classes are often exempt from Social Security and Medicare on those wages. If those lines appear on a campus paycheck, ask the payroll office whether the student exception applies to your job. Off-campus employers generally withhold them.

Net pay is the amount that lands in your account. Check the hours on each stub against your own record, and keep every stub until you have filed your taxes for that year. Your employer sends a W-2 summing up the year's pay and withholding by the end of January.