Form W-4
Employee form that determines federal tax withholding from paychecks.
Form W-4 (Employee's Withholding Certificate) is completed by employees to tell their employer how much federal income tax to withhold from each paycheck. The form accounts for filing status, dependents, other income, deductions, and extra withholding. The 2020 redesign eliminated allowances and uses a more straightforward approach.
Example
A new hire completes a W-4 claiming married filing jointly with two dependents—the employer uses this information to calculate the correct federal withholding from each paycheck.
Why It Matters for Your Business
An incorrect W-4 leads to either too much withheld (reducing your cash flow) or too little (resulting in a tax bill and possible penalties at filing time).
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
Related Financial Guides & Resources
Automate Your Finances with AI
FiscalInsights uses AI to automate bookkeeping, track expenses, and forecast cash flow — so you can focus on your business.
Start Free Trial