What is the purpose of Form W-4?

Form W-4 is designed explicitly for employees to inform their employers about how much federal income tax should be withheld from their paychecks. When starting a new job or if a significant change occurs in personal circumstances, such as marriage or having children, employees need to accurately complete this form to ensure proper tax withholding. The form takes into account various factors, including the employee's marital status, number of dependents, and any additional income or deductions that might affect their tax liability.

By filling out Form W-4, employees can help ensure that the amount withheld aligns with their tax obligations, helping to avoid owing a large sum at tax time or receiving a large refund. Adjusting this withholding reflects careful tax planning, aligning closer to the employee’s actual tax situation for the year.

The other options do not pertain to the primary role of Form W-4. For instance, reporting investment income or state tax contributions involves different forms that serve distinct purposes, while retirement contributions typically require separate documentation. Thus, the key function of Form W-4 is its role in directing employers on federal income tax withholding.