The Form W-4 must be completed so that you know how much federal income tax to withhold from your new employee's wages. The importance of filing a Withholding Allowance Certificate, Form W-4, cannot be overstated, so make its completion a priority. Our discussion of payroll withholding will help you understand how the Form W-4 should be completed and how you should use it in doing payroll.

If for some reason an employee does not file one, you must withhold tax as if the employee had claimed no exemptions. If a married employee does not claim his married status on Form W-4, the employer must withhold on the basis of the "single employee" withholding tables. Since the withholding rates for single employees are higher than those for married workers and since the amount of tax withheld from a given wage payment decreases as the number of exemptions claimed increases, it is important that you ask all employees to file a certificate.

In 1997, Form W-4 was given another important function: in many states, a copy must be sent to a state agency as part of the required information about new hires.

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