The DE 4 is used to compute the amount of taxes to be withheld from your wages, by your employer, to accurately reflect your state tax withholding obligation.

My question is, do employers simply use this as a guide to determine the amount to withhold from employees paychecks? Or do they actually submit this form to the CA government?

Let me give a concrete example.

Employee Adam gets hired at XYZ corp. He fills out a DE 4 form and marks himself exempt (because he did not owe any wages last year, and expects to owe none this year).

Does XYZ corp ...

1. Send the DE 4 form to CA government? ... or
2. Not send the DE4 form to CA, and only use it themselves as a reference for remembering to not withhold any tax when they cut paychecks to Adam