What is a W-4 form?
The Employee’s Withholding Allowance Certificate (Form W-4) is a form that the federal government requires employees to fill out when they are newly hired. Information submitted on the form lets employers know how much salary to withhold from a paycheck for federal tax purposes.
Workers should complete a new W-4 if they have any major changes in their financial situation, including:
- An increase in salary
- A marriage
- Having a child
Employers should keep an employee’s most current W-4 form in each worker’s payroll file, in case the IRS asks for a copy. You need to make sure you add the correct number of allowances into your payroll processing system.
If an employee fails to complete or sign the W-4 before the first payroll date, you must withhold federal income taxes as if the employee had chosen single filer status with zero allowances.
Here is the W-4 form, Steps 1 and 2:
The W-4 collects the worker’s basic information (name, address, filing status) in Step 1. Filing status is important, because the IRS uses different income tax tables, based on the filing status.
Step 2 addresses employees who have multiple jobs, or who have working spouses. If this situation applies to you, use the IRS tax withholding estimator, or the Multiple Jobs worksheet to calculate you withholdings.
Here is the worksheet:
Finally, here are Steps 3, 4 and 5:
You compute the number of dependents in Step 3. You can adjust your withholding amount in Step 4, including any additional tax you want withheld by pay period. If you know about extra income that will increase your tax liability, you can increase your withholdings.
The taxpayer signs the form in Step 5.
Keep in mind that independent contractors are not employees, and do not have taxes withheld from pay. Contractors are issued 1099 forms when they earn income.
Take Charge of the Process
Employees need to collect and use W-4 information for payroll purposes, and using technology can help.
Form Pros provides a W-4 generator that is user friendly, and helps you produce and print W-4s in less time. Use Form Pros to take charge of the payroll process.
Do you have current W-4 forms for all of your employees?