www.irs.gov

Publication 4081 (8-2002)

Catalog Number 34666Y

EMPLOYEE

INCOME TAX

WITHHOLDING

What is 

Federal 

Income Tax 

Withholding?

www.irs.gov

The Rules 

Section 3402 of the Internal Revenue Code

(IRC) provides legal authority for income

tax withholding from wages and other

forms of income. Withholding allowances

are given for:

a. Personal and dependency exemptions.

b. Special withholding allowances.

c. Itemized deductions, tax credits and

other items specified in the

regulations.

Penalties

You may have to pay a penalty of $500 if

both of the following apply:

• You make statements or claim

withholding allowances on your Form

W-4 that reduce the amount of tax

withheld, and

• You have no reasonable basis for those

statements or allowances at the time

you prepare your Form W-4.

There is also a criminal penalty for willfully

supplying false or fraudulent information

on your Form W-4 or for willfully failing to

supply information that would increase the

amount withheld.

The penalty upon conviction can be either

a fine of up to $1,000 or imprisonment for

up to one year, or both. These penalties

will apply if you deliberately and knowingly

falsify your Form W-4 in an attempt to

reduce or eliminate the proper withholding

of taxes.

A simple error — an honest mistake — 

will not result in one of these penalties.

For example, a person who has tried to

figure the number of withholding

allowances correctly, but claims seven

when the proper number is six, will not be

charged a W-4 penalty.

The Internal Revenue Service has focused its efforts

against willful non-filers and non-compliance

schemes by adopting a twofold approach;

1. Assist taxpayers to correct their filing status

and comply with the tax law.

2. Vigorously apply both civil and criminal

sanctions against individuals who persist in

violating the tax law.

Maintaining public confidence in the fairness of tax

laws is paramount. Recommending prosecution of

those who willfully violate tax laws demonstrates

the IRS’ commitment to ensuring that everyone

pays their fair share of taxes.

Report suspicious or

misleading tax information to

your local IRS office or call 

1-800-829-0433

Employee’s

Withholding

Allowance

Certificate

Form W-4

Department of the Treasury

Internal Revenue Service

ww.irs.gov

What is 

Federal 

Income Tax 

Withholding?
F REQUENTLY A SKED Q UESTIONS

What about...

those who believe they don’t have to pay taxes?

There have always been individuals who, for a variety of reasons, argue that various taxes are illegal. They use false,

misleading, or unorthodox tax advice to gain followers. The courts have repeatedly rejected their arguments as

frivolous, and now routinely impose financial penalties for raising such meritless defenses.

The promoters of this tax advice often charge hefty fees or commissions to subscribe to their philosophies.

Unfortunately, in this end, you may pay more in penalties, interest, and legal fees for following their bad advice.

Their philosophies have lead to the financial ruin of innocent taxpayers deceived by false information. 

Believe it or not — a number of individuals who market these ideas actually pay taxes.

www.irs.gov

The Federal Income Tax is 

a pay-as-you-go tax. 

You must pay the tax 

as you earn or receive income 

during the year.

When Should I Check 

My Withholding?

Since you last filed Form W-4 with

your employer did you...

Marry or divorce?

Gain or lose a dependent?

Change your name?

or 

Were there any major changes to...

– Your non-wage income

(interest, dividends, capital

gains, etc)?

– Your family wage income (you

or your spouse started or

ended a job)?

– Your itemized deductions?

– Your tax credits?

If you answered "yes" ... to any of

these questions or you owed extra tax when you filed 

last year’s return, you may need to file a new Form W-4

for the current year. 

See your employer for a copy of the current year 

Form W-4 or call the IRS at 1-800-829-1040.

For more information:

Publication 919

How Do I Adjust My Tax Withholding?

Publication 505

Tax Withholding and Estimated Tax 

What form do I use to

claim income tax

withholding?

Form W-4, Employee’s

Withholding Allowance Certificate

How many withholding

allowances should I

claim on my Form W-4?

You can claim the number of

withholding allowances that you

are entitled to based on the Form

W-4, Employee’s Withholding

Allowance Certificate, worksheets.

You can claim less than you are

entitled, but not more

Do I put the same

number of exemptions

on my tax return as I put

on my W-4 form?

What you put on your Form W-4 is

withholding allowances, not

exemptions. An exemption is

allowed on your tax return for

yourself, your spouse (if married

filing jointly), and qualifying 

dependents (if you are a U.S.

citizen or resident alien).

Can I claim exempt from

withholding?

To claim exemption from

withholding the following must be

true:

• For the previous year, you had a

right to a refund of all income

tax withheld because you had no

tax liability, and

• For the current year, you expect

a refund of all income tax

withheld because you expect to

have no tax liability.

What will happen if I do

not give a Form W-4 to

my employer?

Publication 15, Circular E, Employers

Tax Guide, states that if an employee

does not give them a completed

Form W-4, they are to withhold tax

as if he or she is single, with no

withholding allowances. 

Your employer is 

required 

by federal law 

to withhold income taxes 

from employee wages. 

www.irs.gov

Employee’s

Withholding

Allowance

Certificate

Form W-4

Department of the Treasury

Internal Revenue Service

ww.irs.gov