Form W-4 allows employees to account for certain types of income and adjustments that are not subject to regular wage withholding. This information affects how federal income tax withholding is applied through the payroll system.
Other Income Not Subject to Withholding
Other income entered on Form W-4 refers to income that does not have federal income tax withheld at the source, such as interest, dividends, or certain retirement income. Including this information allows withholding on wages to reflect additional income expected during the year.
Withholding Adjustments
Form W-4 provides a mechanism for adjusting withholding to account for income or factors that are not otherwise reflected in regular payroll wages. These adjustments influence how withholding tables are applied by the employer.
Distinction From Estimated Tax Payments
Adjustments made through Form W-4 operate within the payroll withholding system. They do not replace estimated tax payment requirements and do not constitute a calculation of total tax liability.
Employer Application
Employers use the other income and adjustment information provided on Form W-4 solely to apply withholding formulas to wages they pay. The form is retained as part of payroll records and is not routinely filed with the Internal Revenue Service.