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In the US, the IRS W-4 Form is filled out by employees to showcase their tax situation to their employers. This form is used to provide details to the employer about how much they can withhold from your income to pay the federal income tax. This form ensures the IRS collects your federal income tax promptly from you.
To complete the W-4 Form, you need to first need to verify your personal and demographic information. After that, you need to mention your multiple jobs, if any, claim tax credits withholding by the number of children, and other dependents, and make adjustments. Lastly, mention your name, date, sign the document, and submit the document to your employer.
The W-4 Form tells your filing status, credit amounts, multiple jobs adjustments, deduction amount, income from other sources, and any additional amount to withhold from your paycheck. Additionally, helps in calculating the amount of federal income tax to withhold and deduct from the pay of the employee.
If the employer withholds more amount from their income tax liability than employees owe, then in this scenario, the W-4 Form helps the employees get a bigger tax refund when they file their ITR. However, if the employer does not withhold enough, the employees at the end of the year may be stuck with tax bills.
Yes, if you have eligible dependents by your side, then you should claim tax on dependents on the W-4 Form. Through this, your employer withholds less tax from your income, giving you more salary to take home. Furthermore, the new form (post 2020) does not use the allowances system. Now, on the W-4 Form, you need to mention the number of qualifying dependents to claim the tax credits.