Tax withholding forms are documents issued by the U.S. Department of the Treasury’s Internal Revenue Service and Individual State governments for the purpose of generating Federal and State income. Similar entities and organizations exist outside of the United States for the same reason(s). In the case of employers, withholding documents are required by law to be given to employees to complete for the purpose of withholding income for the generation of government tax revenue. This article will outline the forms used by the IRS and State governments for withholding income taxes.
THE W SERIES OF TAX WITHHOLDING FORMS:
The W series of tax withholding forms are forms given to employers for withholdings on income for the purposes of taxation, pension, advanced payment, voluntary payment and alternate source of payment not usually withheld These types of forms are available through the IRS and can be filed electronically or financial service provider. Instructions for these forms can be found in the IRS Employer’s Supplemental Guide i.e. Publication 15-A.
*W-4: The most common W form is the W-4 that pertains to how much of an employees income will be withheld based on exemptions and other criteria. When the fiscal year ends, the total of the withholdings is added and the information is sent to both the employee and the IRS via a W-2. To change the amount of withholdings, consulting a Human resources manager and/or IRS publication 919 may be helpful in submitting a new W-4.
*W-4S: The W-4S is the IRS withholding form that allows employees to deduct taxes from sick pay. This may or may not reduce the amount held from regular income and may be beneficial if sick pay has an expiration and does not roll over.
*W-4P: W-4P is the form that is completed when an employer has a pension or retirement plan. Since this money is withheld it may be tax deferred as one’s adjusted gross income will decline by the amount of the withheld amount.
*W4-V: Additional withholdings can be given to the government by completing a form W4-V. This type of withholding may be utilized to reduce taxes, or supplement anticipated tax due at the end of the year.
STATE TAX WITHHOLDING FORMS:
Since tax withholdings also contribute to State government income, separate tax withholding forms are used for States. The State forms are created by each state and therefore one should be aware of the tax withholding form for their State. The following link is a useful source of State tax withholding forms/documentation requirements. State tax withholdings are also reported on form W-2’s after the end of the fiscal year. This information is sent to both the Internal Revenue Service and the income tax payer.
ADJUSTING WITHOLDINGS TO BE MORE OR LESS:
In some cases, either too little or too much income tax is being held back from one’s paycheck. Determining the ideal amount of withholding is a matter of calculating how much one’s estimated tax due will be after the end of the fiscal year and matching tax withholdings with that amount. Income tax withholding can be adjusted by submitting a revised Form W-4 to one’s employer. IRS publication 919 is a Federal publication that illustrates and explains the withholding adjustment process, and provides tips and instructions on why an adjustment may be necessary.
OTHER TAX WITHHOLDING FORMS:
In addition to standard employee income, withholdings are also required for several other types of income including scholarships, grants, pensions, non-resident employee income, income acquired abroad, interest, rental, and dividend income. In some cases, financial institutions may require a form W-9 for identification and reporting purposes. Additionally, form 1099’s are used to report additional income such as interest, capital gains, non-employee, and dividend income to the IRS. If no income is withheld for this income, the form 1099 will make this clear to the IRS and income recipient, at which point it is the responsibility of the income recipient to report and pay due taxes by filing the necessary tax forms such as the form 1040, and schedule C.
Tax withholding is reported to State and Federal tax authorities in addition to income sent and/or received. Various forms are used to report tax withholdings or the lack thereof to the tax authority. If tax is not withheld and income received is taxable, tax will become due the following fiscal year after receipt of the income. Of the forms that record income tax withholdings are the W, and 1099 series of IRS tax forms in addition to State tax forms and income recipient filing forms such as State and Federal income tax forms. Several types of income are subject to income withholding and/or taxation. If tax is not withheld from such income, this tax must be reported to the IRS by the income distributor or facilitator, for example, capital gains acquired through a brokerage would be reported by the brokerage using a form 1099.