In simple terms, state tax withholding is a certain amount of deduction an employer has to make from a worker’s payroll. Every state in the U.S. imposes a specific amount of income tax that must be withheld from the workers’ salaries. But there is no specific law regarding withholding income tax as certain states don’t require employers to deduct taxes from employees’ wages.
What does a W-4 Form Mean?
The W-4 form is basically a document that contains all the detailed information regarding the income tax of an employee. Usually, every employee fills up a W-4 form before joining a new appointment. Employers use this document as a withholding certificate to deduct taxes from an employee’s paycheck.
Significance of a State Tax Withholding Form
The W-4 forms play a crucial part in determining how much tax an employer should deduct from a worker’s salary. W-4 forms help the IRS collect the right amount of taxes from each individual in due time. When a worker fills out the W-4 form, the employer deducts a certain portion of their wages. Then the deducted amount of the salary goes to the IRS as a part of the income tax set by the state.
The Federal W-4 Form vs. the State Form
An employer has to subtract three types of taxes from a worker’s wages: local, federal, and state. Therefore, it’s mandatory for every employee to fill out the federal W-4 form in order to provide the necessary information to the IRS. Employees who fail to provide accurate information on the federal W-4 form might face a penalty or punishment.
On the contrary, not all states in the U.S. require employees to fill out the state W-4 form. Moreover, regulations regarding state tax withholding can vary among states and can be easily changed or modified. Whereas rules concerning federal taxes often remain constant in every state of the U.S. and are not subject to change.
State W-4 Requirements in the U.S.
Several states in the U.S. require employees to fill out state W-4 documents, such as:
District of Columbia
U.S. States That Exempt W-4 Form
Workers living in certain states in the U.S. don’t have to fill out any state W-4 forms. These states are:
Besides, workers will have the opportunity to apply for the tax withholding exemption if they don’t have any tax liability.
In the U.S., different state tax withholding regulations have the ability to reduce a worker’s paycheck significantly. But many states often provide a lot of flexibility and freedom in withholding income taxes from employees. That’s why having a sound concept about different state tax withholding rules can benefit workers in the long run.