Q1: In the past, as an employer, I was required to submit all Forms
W-4 that claimed complete exemption from withholding (when $200 or more in
weekly wages were regularly expected) or claimed more than 10 allowances. What
Forms W-4 do I now have to submit to the IRS?
A1: Employers are no
longer required to routinely submit Forms W-4 to the IRS. However, in
certain circumstances, the IRS may direct you to submit copies of Forms W-4 for
certain employees in order to ensure that the employees have adequate
withholding. You are now required to submit the Forms W-4 to IRS only if
directed to do so in a written notice or pursuant to specified criteria set
forth in future published guidance.
Q2: If an employer no longer has to submit Forms W-4 claiming complete
exemption from withholding or claiming more than 10 allowances, how does the IRS
determine adequate withholding?
A2: The IRS is making more effective
use of information contained in its records along with information reported on
Form W-2 wage statements to ensure that employees have enough federal income tax
withheld.
Q3: If the IRS determines that an employee does not have enough federal
income tax withheld, what will an employer be asked to do?
A3: If
the IRS determines that an employee does not have enough withholding, we will
notify you to increase the amount of withholding tax by issuing a “lock-in”
letter that specifies the maximum number of withholding allowances permitted for
the employee. You will also receive a copy for the employee that identifies the
maximum number of withholding exemptions permitted and the process by which the
employee can provide additional information to the IRS for purposes of
determining the appropriate number of withholding exemptions. If the employee
still works for you, you must furnish the employee copy to the employee. If the
employee no longer works for you, you must send a written response to the IRS
office designated in the lock-in letter indicating that the employee is no
longer employed by you. The employee will be given a period of time before the
lock-in rate is effective to submit for approval to the IRS a new Form W-4 and a
statement supporting the claims made on the Form W-4 that would decrease federal
income tax withholding. The employee must send the Form W-4 and statement
directly to the IRS office designated on the lock-in letter. You must withhold
tax in accordance with the lock-in letter as of the date specified in the
lock-in letter, unless otherwise notified by the IRS. You will be required to
take this action no sooner than 45 calendar days after the date of the lock-in
letter. Once a lock-in rate is effective, an employer can not decrease
withholding unless approved by the IRS.
Q4: As an employer, after I lock in withholding on an employee based on
a lock-in letter from the IRS, what do I do if I receive a revised Form W-4 from
the employee?
A4: After the receipt of a lock-in letter, you must
disregard any Form W-4 that decreases the amount of withholding. The employee
must submit for approval to the IRS any new Form W-4 and a statement supporting
the claims made on the Form W-4 that would decrease federal income tax
withholding. The employee should send the Form W-4 and statement directly to the
address on the lock-in letter. The IRS will notify you to withhold at a specific
rate if the employee’s request is approved. However, if, at any time, the
employee furnishes a Form W-4 that claims a number of withholding allowances
less than the maximum number specified in the lock-in letter, the employer must
increase withholding by withholding tax based on that Form W-4.
Q5: I have been directed to lock in an employee’s withholding. What
happens if I do not lock in the employee’s withholding as
directed?
A5: Those employers who do not follow the IRS lock-in
instructions will be liable for paying the additional amount of tax that should
have been withheld.
Q6: Our employees can submit or change their Forms W-4 on line. How can
I prevent them from changing their Forms W-4 after they have been locked-in by
the IRS?
A6: You will need to block employees who have been
locked-in from using an on line Form W-4 system to decrease their withholding.
Q7: What should I do if an employee submits a valid Form W-4 that
appears to be claiming an incorrect withholding amount?
A7: You
should withhold federal income tax based on the allowances claimed on the Form
W-4. But, you should advise the employee that the IRS may review
withholding to ensure it is adequate, and that the IRS may direct you, as the
employer, to withhold income tax for the employee at a certain rate if the
review indicates the employee’s withholding is inadequate. Once this occurs the
employee will not be allowed to decrease their withholding unless approved by
the IRS.
Q8: What do I do if an employee hands me a substitute Form W-4 developed
by the employee?A8: Employers may refuse to accept a
substitute form developed by an employee and the employee submitting such a form
will be treated as failing to furnish a Form W-4. In such case, you should
inform the employee that you will not accept this form and offer the employee an
opportunity to complete an official Form W-4 or a substitute Form W-4 developed
by you. Until the employee furnishes a new Form W-4, the employer must withhold
from the employee as from a single person claiming no allowances; if, however, a
prior Form W-4 is in effect for the employee, the employer must continue to
withhold based on the prior Form W-4. As an employer, a substitute
withholding exemption certificate developed by you can be used in lieu of the
official Form W-4, if you provide all the tables, instructions, and worksheets
contained in the Form W-4 in effect at that time to the employee.
Q9: What do I do if an employee hands me an official IRS Form W-4 that
is clearly altered?
A9: Any alteration of a Form W-4 (e.g. crossed
out penalties of perjury statement above the signature) will cause the Form W-4
to be invalid. If an employer receives an invalid Form W-4, the employee will be
treated as failing to furnish a Form W-4; the employer must inform the employee
that the Form W-4 is invalid, and must request another Form W-4 from the
employee. Until the employee furnishes a new Form W-4, the employer must
withhold from the employee as from a single person claiming no allowances. If,
however, a prior Form W-4 is in effect for the employee, the employer must
continue to withhold based on the prior Form W-4.
Q10: I heard my employer no longer has to routinely submit Forms W-4 to
the IRS. How will this affect me as an employee?
A10: There is
no change in the requirement that employees have adequate income tax
withholding. The withholding calculator found on
href="http://www.irs.gov/">www.irs.gov is available to help employees
determine the proper amount of federal income tax withholding. Another useful
resource, Publication 919, “How Do I Adjust My Tax Withholding?” is available on
the IRS Web site or can be obtained by calling 1-800-TAX-FORM (829-3676).
Individuals who do not have sufficient income tax withholding are subject to
penalties. The IRS will be making more effective use of information contained in
its records along with information reported on Form W-2 wage statements to
ensure that employees have enough federal income tax withheld.
Q11: As an employee, what happens if the IRS determines that I do not
have adequate withholding?
A11: The IRS may direct your employer to
withhold federal income tax at an increased rate to ensure you have adequate
withholding by issuing a lock-in letter. At that point, your employer must
disregard any Form W-4 that decreases the amount of withholding. You will
receive a copy of the lock-in letter. You will be given a period of time before
the lock-in rate is put in effect to submit for approval to the IRS a new Form
W-4 and a statement supporting the claims made on the Form W-4 that would
decrease your federal income tax withholding. You should send the Form W-4 and
statement directly to the address on the lock-in letter. Once a lock-in letter
is issued, you will not be allowed to decrease your withholding unless approved
by the IRS.
Q12: What if I don’t want to submit a Form W-4 to my
employer?
A12: Your employer is required to withhold income tax from
your wages as if you are single with zero allowances if you do not submit a Form
W-4.
