How to file W-4

Form W-4 is a tax form used by the United States Internal Revenue Service.

The form is used by employers to determine the correct amount of tax withholding to deduct from employees' wages.

From The IRS website:

The federal income tax is a pay-as-you-go tax.

There are two ways to pay as you go:

• Withholding of income tax from your pay or from certain other income as pensions, bonuses, commissions, and gambling winnings.
• In each case, the amount withheld is paid to the IRS in your name after considering the amount you earn and the information you give your employer on Form W–4.

or -

• Estimated tax made for People who are in business for themselves.
• You may have to pay estimated tax if you receive income such as dividends, interest, capital gains, rent, and royalties.
• Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well.

wikipedia:

• When filling out a Form W-4, an employee calculates the number of Form W-4 allowances you will claim, based on your expected tax filing situation for the year.
• For each Form W-4 allowance taken, the amount of money withheld as Federal income tax is reduced.
• This, in turn, reduces any tax refund for which you may be eligible, or conversely raises one's liability for taxes due.
• No interest is paid on over-withholding.
• Penalties are imposed for under-withholding beyond a certain threshold.
• The IRS Withholding Calculator can also calculate withholding allowances - the amount of income tax to be withheld from each paycheck you receive, more exactly.
  
  You may choose up to 10 withholding allowances.
  
  

Completing W-4 form is important because it allows your employer to withhold the correct federal income tax from your pay.

Find out how to complete Form W-4 2009

Related articles:
Tax withholding

Topic 753 - Form W-4 – Employee's Withholding Allowance Certificate