Question

Madeline Ball, one of your firm’s employees, has just come into the payroll department and says to you, “I am thinking of amending my Form W-4 so that an additional $25 is withheld each week. That way I will get a fat refund next year. What do you think of my idea?” How would you respond to Madeline?

Answer 1

Form W-4 is used to indicate tax situation to an employer by an employee. The details filled in form W-4 helps the employer in decuting the correct amount of tax.

The idea of Madeline Ball to show less exemptions, so as to increase additional $25 withheld each week is not the ideal one. This is because, withholding amount deducted each week will be received as refund after she files the return. The income tax dept checks and verifies and then the refund will be credited. This will lead to blocking of her funds. Instead it is better to give details of the exact dedcutions, so that the tax withheld and final tax laibility are close to each other. T