Which statement is true about a W-4 form?

The W-4 form is primarily used to determine how much federal income tax should be withheld from an employee's paychecks. When an individual starts a new job or experiences a significant life change, such as marriage or the birth of a child, they typically fill out a W-4 to instruct their employer on their tax withholding preferences. This form takes into account factors like the employee’s filing status, number of dependents, and any additional amounts they wish to have withheld.

This process helps ensure that employees do not underpay or overpay their taxes throughout the year, potentially affecting their tax refund or balance due when they file their tax return. The significance of the W-4 lies in its role in the withholding process, making "determines how much tax is withheld from the paycheck" the best characterization of its purpose.

The other options do not accurately describe the W-4 form: it does not detail an employee's total earnings, is not used for reporting investment income, and is not submitted by the employer to the IRS. Instead, the employer uses the W-4 to calculate withholding amounts and to fulfill their reporting requirements based on the information provided by the employee.