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A W-4 Form from the IRS, also known as the Withholding Allowance Certificate of an employee, refers to a form that enables employers to become aware of how much federal tax needs to be deducted from the paycheck of an employee. This form can also be utilized by employees to withhold additional amounts from their paycheck. W-4 Form is worthwhile if a person is employed in more than one job, if a person’s spouse earns also, or if an employee has a self-employment income.
The W-4 Form is required to hold back specified and the right amount of taxes from the paychecks of workers. The purpose here is to prevent individuals from overpaying the taxes, so they get less final pay or have a huge balance due at the time of paying taxes. Employees consider and fill out the W-4 Form and choose a certain number of allowances. The more the number of allowances, the lesser taxes are held back from the paycheck.
The IRS requires individuals to reimburse their taxes on their salaries during the year. Thus, it is crucial to fill out this form precisely and correctly. In case an individual does not have sufficient tax held back from the paycheck, they are obligated to pay a huge sum to the IRS when filing taxes in the month of April, along with penalties and interest for taxes underpayment. The W-4 form is also used to make a declaration of a person’s exemption from withholding. Thus, an employer won’t deduct any federal or state income tax from the paycheck of an exempted employee.