Employee's Withholding Allowance Certificate; the W-4 tells the employer how many withholding allowance the employee is claiming along with the employee's marital status; it also tells the employer if the employee claims exemption from withholding.

With the year winding down, you may want to take a few minutes to make sure what is being withheld from your paycheck matches your actual tax liability. 

If you're having too much tax withheld, that's money you can't use until you get your refund. If you're not having enough withheld, you will owe tax at the end of the year, and you may even have to pay a penalty. Generally, a penalty will apply if your withholding and estimated tax payments total less than 90 percent of your current year’s tax liability and less than 100 percent of the previous year's tax.

You should pay particular attention to your withholding if you received a big refund check this year or if you had to make a tax payment that was more than you could comfortably pay. 

Also check your withholding if you had a significant change in your life this year, like marriage, divorce, birth or adoption of a child, purchase or sale of a home, or retirement. And there is a good chance you're not having enough withheld if you have more than one job, your spouse works, you have income not subject to withholding, such as rent, dividends, interest or capital gains, or you owe other taxes like self-employment or household employment taxes.

You can adjust the amount withheld from your paycheck by giving your employer a new Form W-4, Employee’s Withholding Allowance Certificate . 

Need help in figuring out whether you are withholding enough? Look at Publication 919, How Do I Adjust My Tax Withholding?

Or you can check out the Withholding Calculator . With the help of current pay stubs and a copy of last year’s tax form, you can check to see if you are withholding the right amount. You can use the calculator results to fill out a new Form W-4

Information provided by IRS Memo "Check Your Withholding"