Federal Income Tax Withholding
Whenever you pay wages
or other compensation to an employee,
you can assume that the IRS will expect you to collect a portion of the
employee's federal income tax on the payment through withholding.
the withholding amount: once you've determined that a given payment is
subject to withholding, calculating the amount to withhold is fairly
straightforward. Although the law provides specific rules for calculating
that amount, the IRS has reduced the rules to simple tax tables that you can
use in most cases.
exemptions: because an employee's tax liability differs depending on his
or her marital status, number of dependents, and other factors, each of your
employees must fill out a W-4 form that accounts for such differences by
allowing the employee to claim one or more withholding exemptions.