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ITG FAQ #1 Answer-How do we know how much federal income tax to withhold from an employee's wages?

You should have a Form W-4, Employee's Withholding Allowance Certificate, on file for each employee. The amount to be withheld is determined by the employee's gross wages and the information submitted by the employee on Form W-4. This information includes:

  • employee's marital status;
  • number of withholding allowances claimed;
  • employee's request to have additional tax withheld; or
  • employee's claim to exemption from withholding.

Ask each new employee to give you a signed Form W-4 by his or her first day of work. This certificate is effective with the first wage payment and will last until the employee files a new certificate. (If an employee does not give you a Form W-4, withhold tax as if the employee were a single person who has claimed no withholding allowances.)

Generally, Forms W-4 are for your records. They need not be sent to IRS.

There are several ways to figure income tax withholding, the Wage Bracket Method, Percentage Method, or an alternative method. Refer to Publication 15, Circular E, Employer's Tax Guide, section 16, How to Use the Income Tax withholding tables.

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Page Last Reviewed or Updated: 11-Oct-2016