Which document primarily affects withholding taxes based on an employee’s financial situation?

The W-4 form is crucial in determining how much federal income tax will be withheld from an employee's paycheck. This document allows employees to provide information about their financial situation, including their marital status, the number of allowances they claim, and any additional amount they would like withheld. This information helps employers calculate the appropriate tax withholding amount based on each employee's unique circumstances.

In contrast, the W-2 form is used to report an employee's annual earnings and the taxes that have been withheld from their paychecks, rather than affecting the withholding amount directly. The 1099 form is typically used for independent contractors and reports income earned outside of traditional employment, hence it doesn't influence withholding taxes. Lastly, the 1040 form is an individual income tax return used to report total annual income after the tax year ends, rather than for managing withholding during employment. Thus, the W-4 specifically pertains to withholding taxes while the employee is earning income.