Why is a W-4 Form Needed for Payroll?
Payroll is a necessity for all companies. Whether it is a small business or a large corporation, an employer needs to pay their employees on time. This is done through running payroll, which in turn requires your business’s employees to fill out a W-4 form. But what is the W-4, and why do you need it? Have you ever wondered this but didn’t know who or where to ask? There are many sources on the web that claim that there is no need for it and that just because you get into the payroll business doesn’t mean that you should use them. However, today we will be taking a closer look into why you need these forms to complete your business’s payroll and the importance behind them.
What is a W-4 Form?
Let’s break down what a W-4 form is. Firstly, it’s essential to understand that we are all subject to federal and state taxes on our earnings, and the process begins with filing a W-4 form. In short, this form is the employer’s declaration of the allowances they will withhold from their employees’ paychecks for tax purposes. Thus, the IRS describes it as an Employee’s Withholding Certificate. All new employees are required to complete a W-4 form and provide it to their employer. Then, when it comes time for your employees to file their taxes in April, their withholdings count towards their annual income tax bill, which is calculated at this time. This will determine the amount of money they are refunded or owe to the IRS.
How to Fill it Out
There are a few different ways in which a new employee can fill their W-4 form. This means that you must understand these differences to withhold the proper amount of taxes. In 2020 the IRS redesigned the W-4 form, which removed the ability to claim personal allowances. This makes it easier for business owners to determine the withholding amounts. All that employers have to do now is provide information such as:
- address
- social security number
- filling status
An important detail to note is that employees only have to fill out a new W-4 form if they are beginning a new job at a new company or if they wish to change the current amount of taxes being withheld.
Filling Status
When filling out the W-4 form, your employee will choose to claim 0 or 1 on their form. By claiming 1, the employee will most likely receive a refund check from the IRS after filing their taxes in April. This is because fewer taxes are taken out of their paychecks that they receive weekly, monthly, or bi-monthly. On the other hand, if they were to claim 0, this means that your employee likely will receive a little to no refund check from the IRS. Again, this is because they have received more money from their paychecks at the end of every week, month, or every other month.
As a business owner in Ormond Beach, it’s essential to understand the different types of documentation needed to complete your payroll correctly and efficiently. Always keep W-4 forms handy within your business because you never know when the right employee might walk through your door.
Although it is up to your employees to correctly fill out their forms, always make sure that you offer them the correct documentation and submit any additional paperwork to the IRS when completed. At Vision HR, we know that payroll can be time-consuming. Instead of worrying about this headache of a task, let our experts help out with all of your payroll needs. Contact us today to see how we can help you with our exceptional payroll services.
