Final answer:
An employee's Withholding Allowance Certificate is also known as a Form W-4, which determines the federal income tax to withhold from an employee's wages. This system contributes to advance income tax payments and social security funding.
Step-by-step explanation:
Another name for an employee's Withholding Allowance Certificate is a Form W-4. This form is utilized by employers to determine the amount of taxes to withhold from an employee's paycheck. The form reflects the employee's filing status, dependents, and any additional factors that influence the amount of federal income tax withholding.
Deductions from an employee's wages, such as withholding tax or pay-as-you-earn (PAYE), advance the payment of income tax and contribute to social security. Employers also pay certain taxes based on the employee's wages which go towards funding the social security system and other insurance programs. These employer contributions are separate from the withholding taxes deducted from the employee's wages.