Form W-4
Definition
An Internal Revenue Service (IRS) form employees complete to inform their employer how much federal income tax to withhold from each paycheck.
What is Form W-4?
Form W-4, officially titled the Employee’s Withholding Certificate, is completed by employees when they start a new job or when their tax situation changes. It tells the employer how much federal income tax to withhold based on the employee’s filing status, number of dependents, and any additional withholding preferences. The IRS redesigned the W-4 in 2020 to improve accuracy and simplify the withholding process, eliminating the previous allowance system.
Why is Form W-4 Important for Employers?
- Employers are legally required to withhold the correct amount of federal income tax based on each employee’s W-4
- Incorrect withholding can result in employees owing taxes or receiving unexpected refunds at filing time
- Employers must retain W-4 forms and make them available to the IRS upon request
- Timely updates help ensure payroll calculations remain accurate when employees submit revised forms
FAQs
When should an employee submit a new W-4?
Employees should update their W-4 following any major life change that affects their tax situation, such as marriage, divorce, the birth of a child, changes in employment such as a spouse starting or stopping work, or taking on a second job.
Can an employee claim “exempt” from federal withholding on Form W-4?
Yes, if the employee had no federal tax liability in the prior year and expects none in the current year. Exempt status expires each year and must be reclaimed by February 15 to remain in effect.
What should an employer do if an employee does not submit a W-4?
If no W-4 is on file, the employer must withhold federal income tax based on IRS default instructions, generally as if the employee is single with no adjustments.
How ExtensisHR Can Help
We assist employers by:
- Processing and maintaining W-4 forms as part of a streamlined new hire onboarding experience
- Ensuring W-4 records are retained and accessible in accordance with IRS requirements
- Updating payroll withholding calculations when employees submit revised W-4s
- Advising on withholding questions and coordinating updates across payroll systems