Form W-4 and State Tax Withholding Form
Federal Form W-4 is filled out by the employee to determine the amount of taxes that will be withheld from her check. You can download a copy of this form from the IRS Web site. For each state that requires state withholding, there will be a state form to use for that purpose. You can get a copy of this form by contacting your state taxation office. You may order one by telephone or print one from the Web site listed in Appendix C. State income tax withholdings do not apply to people employed in the seven states listed below. Therefore, there is no separate state form for the employee to fill out.
Alaska
Florida
Nevada
South Dakota
Texas
Washington
Wyoming
The tax withholding form will ask if the employee is married or single. The tax rate for single people is higher than it is for married people; however, some people who are married prefer to have their taxes withheld at the higher single rate to help decrease their chances of not having enough taxes taken out during the year and having to pay on April 15th. Then, the number of exemptions is chosen based on the number of dependants the employee has or other criteria of her own choosing. Employees also have the right to file “exempt” and have no federal or state taxes withheld from their check.
Unless you are a CPA or other tax professional, you should not give your employees advice about the marital status or exemptions they should claim on their tax withholding forms. Even if you are a tax professional, this is not a good idea unless you are already the person's tax preparer because you don't know her financial situation. If she wants you to do her taxes in the future, then that's fine and she can adjust her tax withholding forms then. Employees can change their exemptions at any time.
It's easy to transpose numbers. Ask your employee to double-check the accuracy of her social security number on the W-4 form. Also, look at it and verify that you are reading the numbers correctly. A “3” may look like a “5,” and changing a social security number error for payroll purposes is difficult.
There is some generic advice about the tax withholding forms that you can give. If the employee asks, you may let her know that the higher the number of exemptions, the lower the rate of tax that will be taken out. Leave it at that, and let her know that she can update the form any time she needs to.
