What Is a W-4 Form & What Should Employers Know?

The IRS releases an updated W-4 each year, so now is a great time to refresh your knowledge about what this form is used for and how to handle these important documents.

What Is a W-4 Form?

Form W-4 is a 4-page Internal Revenue Service form comprised of the withholding certificate, worksheets, withholding tables, and instructions. After the employee completes the W-4, also called the Employee's Withholding Certificate, the employer uses that data to calculate the amount of federal income tax withheld from the worker's pay.

The 2024 W-4 form has minor changes, so it’s important to ensure that the most recent version is being used.

What Is a W-4 Form Used For?

The purpose of the W-4 form is to inform employers of an employee's withholding status so that employers can withhold the correct federal income tax from your pay. (Social Security and Medicare are set rates, so the Form W-4 has no bearing on those taxes.) A new employee must provide an up-to-date W-4 that specifies their tax withholding status (single, married filing jointly, or head of household), their sources of income, and the dependents they wish to claim to determine the amount of their federal tax credits.

It's essential for employers and HR professionals to understand this form and payroll tax responsibilities regarding the W-4.

W-2 vs. W-4 Forms: What Is the Difference?

W-2 and W-4 forms are important tools for employers to keep track of their employees' compensation and tax withholdings, but they are used at different times in the payroll process and have different purposes. A W-2 form is an annual statement given by employers to their employees that provides information on how much they earned during the year, how much taxes were withheld, and the value of any benefits provided (if applicable) from their paychecks. Employees will use the W-2 to complete their individual tax returns.

Employees typically complete W-4 forms before they start a new job. They provide employers with the necessary personal information (such as marital or dependent status) to determine the proper amount of tax deductions and withholdings. While the employee completes the W-4, the information provided on the form is primarily used by the employer as a basis for payroll calculations throughout the employee's term of employment.

Who Needs To Fill Out a W-4 Form?

Any new employee should complete it. However, any employee who wants the most accurate amount withheld from their pay should complete a new W-4 and use the IRS Tax Withholding Estimator. Additionally, any current employee should fill out a new W-4 if:

• There's a change in filing status (e.g., an employee gets married or divorced or becomes a head of household)
• There's a change in the number of dependents for whom a child tax credit can be claimed
• A spouse enters or leaves the workforce
• An individual takes on a second job

How To Fill Out a W-4 Form as an Employer

While the employee primarily completes the W-4, there is a small section at the bottom of page 1 labeled "Employers Only." Employers or HR representatives of an employer will need to enter the following information:

• The name and address of the company (if your company has multiple locations, you can use either the home office address or the address of the location where the individual will be employed)
• The worker's first date of employment
• Your Employer Identification Number (EIN)

In addition to completing that section of the form, your responsibilities as an employer also include:

• Maintaining the employee's completed and signed form on file
• Accurately recording the provided information in your payroll system
• Calculating the employee portion of any federal taxes and sending them to the IRS along with your employer portion of the taxes

How To Help Employees Fill Out a W-4

If your employees are unfamiliar with the W-4 completion process, they may request assistance completing the form. While you should not provide tax advice or tell them what to claim on the form, there are still steps you can take to assist.

1. Be sure to provide all pages of the IRS form, including the instructions. The IRS already offers detailed instructions to guide employees through completing the form. Unfortunately, some employers may think they are helpful by only providing the pages that need to be filled out. Ensure your employees have all the information, including instructions and calculation tables, necessary to complete the form properly.
2. Guide them to the appropriate resources. The previous year's tax return can be an excellent resource for employees to determine how many deductions can be claimed or how much income was earned from other jobs. If they still have questions or tax-related concerns, encourage them to contact a licensed tax professional.
3. Familiarize yourself with Form W-4. Your role isn't to provide specific guidance on how many children to claim or how much additional income to report. But you can assist if employees have general questions about the form and ask questions such as "How do I read the taxable wage table on page 4?". By becoming familiar with the form, you will be better prepared to address general questions and help your employees feel confident about completing it.

When Must All W-4 Information for an Employee Be Entered?

Every employee must complete the W-4 form as soon as they start work at any company. Failing to submit a W-4 on time may result in incorrect tax calculations. Suppose an employee fails to submit a W-4 upon hire. In that case, the company will typically withhold taxes at the highest single-filer rate, which could cause the employee to have an unexpectedly low paycheck.

Companies are often required by law to have the proper forms completed when onboarding new employees, so it's best to have everything ready well before the deadline. If an employee hasn't completed their W-4 form by the first date of employment, they should do so as quickly as possible after getting hired.

Make Sure Employees Fill Out Their W-4 Forms

Employers can offer employees the option of completing W-4s by paper or electronically. The IRS strongly encourages taxpayers to review their withholding situation using the IRS Tax Withholding Estimator to ensure withholding is not under- or over-withheld.

For additional peace of mind and assurance that all W-4 forms for your employees are completed accurately, filed successfully, and kept secure, it's best to work with a payroll provider specializing in payroll taxes like Paychex.