Since the implementation of the Current Tax Payment Act of 1943, employers have been responsible for withholding taxes from employees' pay and submitting them directly to the government on their behalf.
What the employer is not responsible for is ensuring the proper amount of withholding is being done on behalf of the employee, nor for adjusting the withholding when changes occur to the individual.
When starting a new job, employees are given a W-4 form to fill out. The W-4 form provides information about the employee's filing status, adjustments for multiple jobs, tax credits, other income, deductions, and any extra amount to withhold from each paycheck. This information is used to calculate the correct amount of federal income tax to be deducted and withheld from the employee's pay.
Below are some items you may need to update your W-4 so you won't have any tax liability surprises when you file your following tax returns.
- Marriage / Divorce
- Birth of a new child or Adoption
- Home Purchase
- Big change in your wages
- Working multiple jobs
- Taking consideration of other income. Example: investment income or bank interest
Completing or updating your W-4 can sometimes be confusing, so it is advisable to speak to your accountant or utilize the IRS Tax Withholding Estimator calculator online.