What is Form W-4

Officially called the Employee’s Withholding Certificate, IRS Form W-4 is an IRS document that tells employers how much federal income tax to withhold from an employee’s paycheck. Every US-based employee needs to fill one out during onboarding. 

It factors in details like marital status, dependents, and additional income to calculate the correct withholding amount.

For U.S. employers, collecting a W-4 is a standard part of hiring. But if you’re an international company expanding into the US or managing a hybrid team with US employees, it’s critical to understand how Form W-4 works, and how it differs from other IRS forms used for contractors or foreign workers. Using the wrong form or missing key info can lead to compliance issues down the line.

Next, we’ll discuss who needs a W-4, when to use it, and how to avoid common mistakes.

When do you need Form W-4?

When asking “What is Form W-4?”, chances are the main thing you’re asking is whether or not you actually need it. 

The answer is that if you’re hiring US-based employees (i.e., someone who is on direct payroll and gets a W2 at the year’s end), you will need to have them complete Form W4 before they receive their first paycheck.

There are other situations where you need a new W4, including:

• Their tax situation changes (marriage, new child, side income)
• They request an adjustment to withholding
• The IRS tells them to (yes, this can happen)

Scenario	W-4 Required?	Why?
You’re hiring a US-based employee (W-2)	✅ Yes	IRS requires it to calculate tax withholding
An employee is starting a second job	✅ Yes	Helps avoid under-withholding across multiple jobs
An employee gets married or has a child	✅ Yes	Filing status and dependent credits may change
A US employee wants to adjust their withholding	✅ Yes	They can request more or less tax to be withheld
The IRS issues a withholding directive	✅ Yes	Must be followed by both the employee and the employer
You’re hiring a US-based independent contractor	❌ No	Use Form W-9 instead
You’re hiring a non-US contractor or freelancer	❌ No	Use form W-8BEN or W-8BEN-E
You’re hiring an international employee	❌ No	Use local payroll + EOR solution–not Form W-4

What’s actually on Form W-4?

The W-4 used to be very simple. But now, it’s a very nuanced tax document, and it’s for increased accuracy. The current form includes:

• Personal info and filing status
• Multiple jobs/spouse working checkbox
• Dependent claim amounts
• Other income (like freelance gigs or investments)
• Additional withholding requests

There are no longer “allowances” like in the older forms. It’s all about precision now, which can help avoid underpayment penalties or unexpected tax bills in April.

Common mistakes to avoid with Form W-4

Here are the biggest red flags we often see regarding Form W4, especially with companies that may be scaling fast or onboarding remote talent in bulk.

Mistake	Why It’s a Problem
Treating a contractor like an employee	Triggers tax violations and misclassification risk
Using W-4 for non-U.S. employees	Completely invalid for international payroll
Not updating W-4 after major life events	Leads to incorrect tax withholding
Forgetting to submit a W-4 altogether	IRS default kicks in (single, no adjustments)
Using outdated or altered W-4 templates	IRS may reject them, or worse, treat them as non-compliant

Doing this manually can be challenging, especially if your company is rapidly scaling. One of the best ways to stay compliant and reduce risks is to leverage a global workforce management platform, like Payoneer Workforce Management.

Managing U.S. employees and global contractors? Here’s a smarter way

Now that you’ve got a clear answer to the question “What is Form W-4?”, it’s time to take the next step. 

Your company likely has enough on its plate, and spending time managing a cross-border team’s compliance can take away from time spent on other operational tasks. 

The last thing you need is to chase tax forms, second-guess classification, or wonder whether you’re about to get flagged by the IRS.

Here’s how Payoneer Workforce Management offers guidance, support, and a centralized way to handle it:

• ✅ W-4s for U.S. employees
• ✅ W-9s, W-8BENs, and W-8BEN-Es for contractors
• ✅ EOR(for employees) and AOR(for independent contractors) support, so classification is never a guessing game
• ✅ Secure document tracking and reminders

Whether you’re running a team of 50 or 500, we will help your global workforce, allowing your company to stay focused on core business operations.

If you’re ready to take charge of your workforce, reach out today for a free demo.