When starting a new job or transitioning to a different one, the process of completing new hire paperwork can be a daunting task. Among the various forms that need to be filled out, one of the important ones is the W-4, also known as the Employee’s Withholding Certificate. The purpose of this form is to provide information to your employer on how much money should be withheld from your paycheck for federal income tax purposes. It helps ensure that the correct amount of taxes is deducted, avoiding overpayment or underpayment at the end of the year.
It’s important for employees to know the correct amount of tax to withhold so they don’t owe too much money when filing their tax return or have too much money withheld from their paychecks.
Get tax withholding right.
Federal income tax is a pay-as-you-go tax. Taxpayers pay the tax through their employers as they earn or receive income during the year. Employers take out – or withhold – income tax from employee paychecks and pay it to the IRS in the taxpayer’s name.
If an employee doesn’t have enough tax withheld, they may face an unexpected tax bill and a possible penalty when they file a tax return next year. If they overpay or have too much tax withheld during the year, the employee will likely get a tax refund when they file their tax return. Adjusting the tax withheld up front may mean a bigger paycheck throughout the year.
Form W-4, Employee’s Withholding Certificate New employees must complete Form W-4 so that their employer can withhold the correct amount of federal income
tax from their pay. Employees should read the instructions carefully. The employer will base the amount of withholding on the information the employee provides on their W-4 and how much the employee earns.
People can also submit a new W-4 when their personal or financial situation changes and they want to update their withholding.