Page 198 - Essentials of Payroll: Management and Accounting

Payr oll Taxes and Remittances
direct impact on the amount of income taxes withheld from the
employee’s pay. The form is readily available in Adobe Acrobat form
through the Internal Revenue Service’s web site. An example is shown
in Exhibit 7.1.
There are two pages associated with the Form W-4. In the middle

of the first page is a personal allowances worksheet; the actual form is
at the bottom. The second page is used only by those taxpayers who
plan to itemize their deductions, claim certain credits, or claim adjust-
ments to income on their next tax return.
On the first page of the form, an employee generally should accu-
mulate one allowance for him- or herself, another for a working spouse,
and one for each dependent. Additional allowances can be taken for

“head of household” status or for certain amounts of child or depend-
ent care expenses. The total of these allowances is then entered on line
5 of the form at the bottom of the page, along with any additional
amounts that an employee may want to withhold from his or her pay-
check. (Note: They cannot base withholdings on a fixed dollar amount
or percentage, but they can add fixed withholding amounts to with-
holdings that are based on their marital status and number of allowances.)
An employee can also claim exemption from tax withholding on line 7
of the form.This lower portion of the form should be filled out,signed,

and kept on file every time an employee wants to change the amount
of an allowance or additional withholding, in order to maintain a clear
and indisputable record of changes to the employee’s withholdings.
If an employee has claimed exemption from all income taxes on line
7 of the form, this claim is only good for one calendar year, after which a
new claim must be made on a new W-4 form.If an employee making this
claim has not filed a new W-4 by February 15 of the next year, the payroll

staff is required to begin withholding income taxes on the assumption that
the person is single and has no withholding allowances.

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