HR Guy 1/25/01: You're responsible for mis-filed employee W-4 withholdings!
There have been numerous inquiries about regulations and procedures surrounding the Internal Revenue Service's Form W-4, Employee's Withholding Allowance Certificate. So what follows is a W-4 Primer. The new 2001 Form W-4 can be printed from the link at the end of this document.
What is a W-4 form?
Form W-4 is the IRS's Employee's Withholding Allowance Certificate. It tells you the employer how many withholding allowances to take from an employee's pay for federal income tax purposes.
When must an employee fill out a W-4?
An employee must fill out a W-4 when you first hire the employee or any time during the course of employment that an employee decides to change federal tax withholding.
Can an employee choose to not have any federal income tax deducted from his/her pay?
Yes. This is called exempt status. To qualify, the employee must have had no tax liability for the previous year and must not anticipate having any tax liability for the current year. Employees who claim exempt status must fill out a new W-4 form no later than February 15th on an annual basis.
What do I do with the W-4 after the employee fills it out?
After an employee fills out a W-4, keep the original form in your files. It is your proof that you are withholding federal income tax according to the employee's wishes. If an employee claims more than 10 withholding allowances or claims exempt status and his/her earnings exceed $200 a week, you must send a copy of the Form W-4 to the IRS service center with your next employment tax return. Alternatively, you can send it to the IRS early and they will advise you if you should honor the W-4 form as written.
What if an employee lies on his/her W-4?
An employee may be subject to a $500 fine if he or she submits for no good reason a W-4 that results in less tax being withheld than is required. Of course, if the employee has too much withheld, there is no penalty.
What if an employee wants to make a change in the middle of the year?
No problem. Have the employee fill out a new W-4. This one replaces the old one. You are legally required to have the change effective in the employee's pay no later than the start of the first payroll period ending on or after the 30th day from the date you received the revised form.
What if an employee doesn't complete a W-4?
If an employee fails to complete a W-4 form, withhold federal income taxes as if he/she was single and claiming no withholding allowances.
Do all employees need to fill out a new form each year?
No. Only employees claiming exempt status need to fill out a new W-4 each year. All others need only fill out a new W-4 when they wish to make changes to their withholding.
Where can I get some W-4 forms? Must I buy them?
The brand new 2001 Form W-4 can be downloaded at no cost by clicking here. Laser print it and make as many copies as you need. It is a government form - and it is free! (Note: the form is in PDF format - if you cannot open it, click here to download the free PDF reader).
Have a question for the HR Guy? E-mail him at >firstname.lastname@example.org.