Frequently Asked Questions for Form W-4
- Form W-4 is an employee allowance certificate. The form lets an employer know how much income tax to withhold from an employee's pay. The form is typically filled out when an employee begins a new job and annually thereafter if the employee's financial situation changes.
- A personal exemption is a tax deduction for the taxpayer, a spouse, children and/or other dependents. The taxpayer can deduct a certain amount for each dependent claimed on the tax return.
- Withholding is the amount of tax withheld from an employee's paycheck and sent to the IRS. Taxes are withheld from salaries and wages as well as other income such as pensions, bonuses and gambling winnings. The amount withheld is determined by the amount earned, marital status and the allowances and credits the employee claims on Form W-4.
- Exemption from withholding means no income tax will be withheld from your paycheck. You can claim exempt from withholding if for the prior year you had a right to a refund of all taxes withheld because you had no tax liability and if you expect a refund for the current year because you have no tax liability.
- You can claim head of household if you are not married and you pay more than half the cost of managing your home for yourself and your dependents.
- A tax credit is an amount that can be subtracted from total taxes due. You can reduce the total tax owed by claiming credits. Common credits include the Child Tax Credit, Adoption Tax Credit and dependent care expenses. You can claim a tax credit to reduce the overall amount of taxes due if your personal situation meets IRS standards. For example, to claim the Child Tax Credit, you can reduce your income taxes by $1,000 for each qualifying child under age 17 if the child is claimed as your dependent, is a U.S. citizen and you modified adjusted gross income is below a certain amount (as of January 2011).
