This document summarizes tax withholdings and estimated payments for employees and independent contractors. It defines key terms like income, tax withholding, and estimated tax. It outlines the applicable forms for federal (IRS Form W-4, 1040-ES) and state of Georgia (GA Form G-4, 500-ES) tax withholdings and payments. It provides guidance on calculating withholdings and estimated tax amounts, as well as determining when and how to submit the applicable forms and payments.

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Tax Withholdings and Estimated Payments
Presented by: Jennoa R. Graham, Ph.D.
Friday, March 8, 2013

2.  Income – Money that is received in exchange
for a product, service or contract agreement
 Tax Withholding – Installment payments that
are deducted from the total income earned
(gross) prior to issuing employee paycheck
 Estimated Tax – Installment payments made
by independent contractor from the total
income received for services
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Small Business is not included in this presentation

3.  Allowances (Exemptions) - A point system
based on IRS Form 1040 filing status and
number of dependents, that reduces the
dollar amount deducted from the total
income earned (gross) prior to issuing
employee paycheck
 Withholding Calculator – an application that
determines IRS Form W-4 allowances and
estimated tax liability. Does not calculate
state estimated tax liability.
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4.  IRS Form W-4 – used to determine the dollar
amount to withhold from a payroll check for
federal income tax installments.
 IRS Form 1040-ES – voucher used to submit
estimated federal income tax installment
payments
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5.  GA Form G-4 – used to determine the dollar
amount to withhold from a payroll check for
Georgia state income tax installments.
 GA Form 500ES - voucher used to submit
estimated Georgia state income tax
installment payments
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6.  Determine whether tax withholding or
estimated tax is applicable
 Determine applicable forms for tax
withholding and estimated tax processes
 Calculate the number of tax withholding
allowances or dollar amount of estimated tax
 Determine when and how to submit
applicable forms/payments
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7.  Traditional Employee – Payer controls what work
is assigned and how it is completed
 Independent Contractor – Worker controls what
work is assigned and how the work is completed
 There are exceptions to these general rules
under statutory and common laws guidelines:
 Form SS-8, Determining of Worker Status for Purposes
of Federal Employment Taxes and Income Tax
Withholding
 See www.irs.gov for more information
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8.  Traditional Employee – Payer controls what
work is assigned and how it is completed
 Payroll Tax Withholding - Mandatory
 With Consent (W-4)
 Without Consent (highest rate)
 Withholding Allowance
 W-4 Personal Allowances Worksheet
 Withholding Calculator – Complicated; See
www.irs.gov or tax professional for more information
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Rule of Thumb:
Number of Allowances
Form W-4 < Form1040
Submitted at time of employment; update at anytime

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Rule of Thumb:
Number of Allowances
Form W-4 < Form1040

11.  Independent Contractor – Worker controls
what work is assigned and how the work is
completed
 Estimated Tax Installments - Voluntary
 Prepay (1040-ES)
 Tax Season (1040-V, may include penalty fees)
 Installment Amounts
 1040-ES Estimated Tax Worksheet
 Withholding Calculator – Complicated; See
www.irs.gov or tax professional for more information
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Payments are made once
every 4 months (quarterly)

13.  Payroll Tax Withholding - Mandatory
 G-4, Employee Withholding Allowance Certificate
 G-4, Allowance Worksheet
 Estimated Tax Installments – Voluntary
 500-ES Individual and Fiduciary Estimated Tax Payment
Voucher (Prepay)
 GA-9465 Installment Agreement Request (Tax Season)
 Send request if full payment cannot be made at time of
filing
 Penalties may be applied if request is denied
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See www. etax.dor.ga.gov or tax professional

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Rule of Thumb:
Number of Allowances
Form G-4 = Form W-4

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Payments are made once
every 4 months (quarterly)

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Repayments are due monthly
not to exceed 36 months

17.  Determine whether tax withholding or estimated
tax is applicable
 Tax withholding applicable to Employees
 Estimated tax is applicable to Contractors
 There are exceptions to every general rule
 Determine applicable forms for tax withholding
and estimated tax processes
 W-4 Employee Withholding Allowance Certificate
 G-4 Employee Withholding Allowance Certificate
 1040-ES Estimated Tax
 500-ES Individual and Fiduciary Estimated Tax
Payment Voucher
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18.  Calculate the number of tax withholding
allowances or dollar amount of estimated tax
 Allowances Worksheet
 Estimated Tax Worksheet
 Withholding Calculator (Federal only)
 Determine when and how to submit
applicable forms/payments
 W-4 & G-4 submitted at time of employment and
can be updated at any time during the year
 ES payments submitted quarterly
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20.  IRS (2013). Tax forms and definitions.
Internal Revenue Code, Retrieved March
5, 2013, from http://www.irs.gov
 GA Dept of Revenue (2013). Tax forms and
definitions. Office of Tax Policy, Retrieved
March 6, 2013, from http://etax.dor.ga.gov
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