Employers use which form to compute the amount of federal income tax to withhold from an employee's paycheck?

• A. Form 1099
• B. Form W-4
• C. Form 1040
• D. Form W-2

Answer: (B)

Verified step by step guidance

1. Understand the purpose of each form mentioned in the problem: Form 1099 is used to report income from self-employment or other non-wage sources, Form 1040 is used for individual income tax filing, Form W-2 reports wages and tax withholdings, and Form W-4 is used by employees to inform employers of their tax withholding preferences.
2. Recognize that the question is asking about the form employers use to compute federal income tax withholding from an employee's paycheck.
3. Recall that Form W-4 is specifically designed for employees to provide information about their filing status, number of dependents, and other adjustments, which employers use to calculate the amount of federal income tax to withhold.
4. Eliminate the incorrect options based on their purpose: Form 1099 and Form 1040 are not related to payroll withholding, and Form W-2 is used for reporting wages and taxes after they have been withheld, not for calculating withholding.
5. Conclude that the correct form employers use to compute federal income tax withholding is Form W-4, as it directly provides the necessary information for this calculation.