How to Use Form W-4 to Withhold Income Taxes From an Employee's Pay

Author: Alice Gilman

The IRS extensively revised Form W-4 starting in 2020 due to the 2017 federal tax reform law's suspension of the personal exemption amount through 2025. The title of the revised form is Employee's Withholding Certificate (pre-2020 versions were titled Employee's Withholding Allowance Certificate).

Using past versions of the form, an employee entered the desired number of withholding allowances and the employer used the dollar value of those allowances, along with the employee's income per pay period and tax status, to figure the correct amount of income tax to withhold from the employee's pay. The revised version of the form, however, is completed in five numbered steps and is not based on withholding allowances; employees who want the most accurate withholding must consider and calculate "adjustments" to their income.

This How To will help an employer understand which employees should complete and submit the revised version of the form to the employer and how to use the form to ensure accurate income tax withholding from each employee's pay.