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Federal Income
Tax
Federal income tax is withheld from the pay of almost all employees. Employee
pay is inclusive of salaries and wages, bonuses, commissions, and vacation
allowances. It is the responsibility of the employer to provide the employee
with a W-4 at the onset of their employment. The determination of tax withheld
is computed from the information provided on the W-4. The employee must inform
the employer of their withholding status (married or single), and the number of
exemptions they will be claiming. Employees also have the option to have an
additional amount withheld from their pay. If, over the course of an employee’s
employment, they wish to change or adjust their withholding rates, they may
simply request to complete a new W-4. Publication 919 “Getting the Right Amount
of Tax Withheld” is available from the IRS and can assist employers and
employees in making the best choices for withholding correctly.
Factors that will affect the
amount of federal income tax withheld from an employees check include marital
status, number of exemptions, or whether an employee has more than one job at a time.
These factors will affect federal income tax computations, and should be
included in information provided by the employee at the time of employment. Some
employees, due to filing status, number of exemptions or allowances, and earned
income totals below the national poverty level, will qualify for Advance EIC
payments. These are advance payments of a refund of federal income tax.
Advance EIC payments are made on the employee’s paycheck each pay period, if
requested.
Contributions to qualified
401(k)’s or any other program that allows deductions of “pre-tax” contributions
will affect the amount of federal income tax withholding for each pay period.
Generally, contributions to a 401(k) or other retirement program are a benefit
to the employee at the end of the tax year. These contributions provide a tax
break and reduce the amount of federal income tax due, while providing
retirement benefits to the employee.
Other factors affecting federal
income tax liability are filing status, number of exemptions claimed on your
personal tax return, individuals with more than one job, child tax credits,
education credits, itemized deductions, and nonwage income.
At the end of the tax year,
employees are furnished a W-2. This is a summary of the wages paid and all
deductions taken from the employees gross pay over the course of the past tax
year. All employers are required by law to furnish employees with a W-2 no
later than January 31st of the next tax year.
To summarize, federal income tax
withheld from an employee’s pay can be affected by changes to the employees wage
base, filing status, or simply the acquiring of a second job. All employees
should take the time to review their filing status based on the information
provided on their W-4 and make changes to withholding status and exemptions
claimed as needed.
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