Correlation Found Between Form W-4 and Higher Wages Each Payday

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According to the results of the American Payroll Association’s (APA) 2022 “Getting Paid In America” study conducted during National Payroll Week, 52 percent of employees who completed a Form W-4 increased their take-home pay each payday.

The annual APA poll asked, “Did you complete a new Form W-4, Employee’s Withholding Certificate, at any point in 2021?” In 2021, over 12,314 respondents, or nearly 46%, reported that they completed Form W-4. Of those who said “yes,” 52 percent said they would receive a lower tax refund in 2021, meaning that those employees increased their take-home pay rather than allowing the federal government to hold their money until tax refund time.

“Every paycheck, many Americans overpay their taxes,” APA executive director Dan Maddux said. “By changing your Form W-4, they may improve their take-home pay and give themselves an instant raise, making it easier for many Americans to afford the further expenditure.”

In 2020, the federal Form W-4 was modified for the first time in more than 30 years. Employees must now provide cash amounts rather than allowances to account for anticipated tax deductions. Employees who take too much money out of their paychecks will receive a larger tax refund. Employees who alter their withholding to be closer to their tax payable each payday should receive a reduced tax return and hence more money each paycheck.

The American Payroll Association’s National Payroll Week website offers educational ideas and resources to help employees better understand how to maximize their paycheck savings. For example, the IRS’s Tax Withholding Estimator supports employees in choosing how much they want their employer to deduct from their paychecks.

The “Getting Paid In America” survey was done in conjunction with the American Payroll Association’s annual public awareness campaign National Payroll Week, which ran from September 5 to September 9. The research got over 29,100 replies, providing insight into how individuals in America are rewarded.