Money and You: Course Notes

The W4 form is a form you fill out for your employer when you are hired. This form helps them and the IRS estimate how much you’ll owe in taxes for the year and how much to take from your paychecks. In such a scenario, you don’t actually make payments to the government. Instead, your employer pays the government and reduces the amount in your paycheck.

The W4 will take your personal information. It will also ask for information that used to fall under “exemptions.” So, you will indicate whether you are married, how many dependents you have, etc.

There is one important box for married people or people with multiple jobs. There will be a line asking if you would like to have additional money taken out of your check for taxes. You may have the gut reaction of “hell no!” But hear me out. Suppose you and your spouse each made $35,000. When you fill out your W4, all they have to go on is your $35,000 salary. So, they will tax you based on that amount (tax bracket). However, with your spouse’s and our incomes combined, you bring in $70,000 together, which puts you into the next tax bracket. However, if both of you paid taxes individually under the assumption that you would be taxed at the lower bracket rate, you would be in for a huge rude awakening when you went to file your taxes at the end of the year. You would almost certainly owe a lot more than you were expecting. A similar thing can happen if you work multiple jobs. If you are married or have multiple jobs, it may be best for you to request extra money be taken out with each check.

An I9 is simply a form your employer uses to verify that you’re able to work legally in the US. You’ll need to provide proof of citizenship, legal residency, and/or work eligibility to your employer when they fill it out.

If you work for an employer, you will get a W2. They are generally sent out each January. Your W2 is your summary sheet that you will use to file your taxes. It contains how much you earned in gross pay, how much you paid in taxes, how much you contributed to retirement accounts, how much you paid in health insurance premiums through your work, and a few other items.

Subcontracting is becoming more and more common. You are a subcontractor if you perform work for someone, but you are not their employee. (Think of Uber drivers in most states.) Since they are not your employer, you do not fill out a W4 when you’re hired. However, they still must report how much they paid you (and thus your income) to the government. So, you fill out a W9, which gives them your personal identifying information for taxation purposes.

If you get income from anywhere else, you can report it via a 1099 form. If you have interest income, money you made from selling homemade soap, or $100 you found in the gutter, you can report it on a 1099.

If you are asking yourself why you would self-report income that no one seems to know about that will only be taxed, keep in mind that it isn’t really that hard for the IRS to sniff out discrepancies. The last thing you want is to be audited. You’ll have to pay fines and late fees. If you purposely avoid disclosing a larger amount of income, you could go to jail for tax evasion.

A 1098 form can help reduce the amount of taxes you owe. If you pay interest on student loans or a mortgage, you can reduce your taxable income via this form.