Basic Overview of Form W-4

Form W-4 is completed by new employees so that the employer can withhold the correct federal income tax from the employees pay. Anytime an employee's personal or financial situation changes they should complete a New Form W-4 to adjust their withholding appropriately.

The Form W-4 doesn't calculate the actual dollar amount to be withheld from the employees pay but rather the number of "allowances" requested by the employee.

 Employees can determine their allowances one of three ways:

1. Personal Allowances Worksheet (main one used/most common)
2. Deductions and Adjustments
3. Two Earner/Two Job Worksheet.

The Personal Allowance Worksheet is the most commonly used worksheet and it's very self explainatory. You really only need to have the employee read the question and answer it if  applies to them. The questions are listed as A - H. The employee needs to start with Line A to determine the amount of allowances they're eligible for. The employee will end with Line H where it asks them to total the number of allowances they listed from Line A- Line G. This would be the number of allowances their eligible to claim and what you need to enter into your payroll system.