What is a W-4 Form?
Employers must withhold a portion of the salaries they pay to their employees as prepaid federal income tax payments. How much they withhold is determined by the information that the employee puts down on the IRS W-4 form. This form can be downloaded as a PDF file at the Internal Revenue Service website. The file includes easy to understand instructions and tables that make filling it out quite straightforward.
Significance
The Internal Revenue Service (IRS) is responsible to collect taxes for the federal government. Everyone files an annual statement of their taxable income with the IRS. Based on what this statement shows, the citizen may owe some federal income taxes. On the other hand, they may have overpaid and be due a refund. Finally, they may have correctly estimated and pre-paid their income taxes.
Function
When an employee earns a wage or salary, the employer must deduct and withhold a portion of the person's income. It is sent to the IRS in advance of the annual deadline to file personal income taxes which is usually April 15. The IRS requires employers to keep signed W-4 forms on file for every employee. This form provides the information about how much income should be withheld by the employer.
Features
The W-4 form has blanks for the employee to fill in with their full name and address. They must provide their social security number as well as their marital status. There is also a box to check if the name on file with the social security office is not the same as the current legal name of the person. The form gives a toll-free telephone number to call in this case.
Considerations
Other required information on the W-4 form helps determine what amount of money must be withheld by the employer. Unless the employee expects to earn less than $900 and can also be claimed as someone else's dependent for tax purposes, some money will be taken out of every pay check. The actual amount takes into consideration the number of dependents that the employee is supporting. Child care expenses, child tax credits, personal allowances, non-wage income, multiple jobs, a spouse who works are all factors in this calculation. The W-4 form also asks if the employee is a non-resident alien.
Insight
Sometimes an employee would like more money withheld than the W-4 form determines is due. This is usually done as a strategy to off-set the tax liability for other kinds of income such as from stock dividends or self-employed side jobs. After arranging for any additional withholdings, the W-4 form has a line for the employee's signature. The employer's name, address and EIN number must also appear on this form.