Form W-4 helps employers determine how much federal income tax to take out of their employees’ wages. On the form, employees state their withholding conditions, such as filing status, number of allowances and any additional amount they want to be withheld. It is the employee’s responsibility to fill out the form so that the right amount is withheld.
As the employer, you must honor all W-4 requests, except if the form is invalid or you’re notified to do otherwise by the IRS.
What is an invalid W-4?
If the employee alters or makes any additions to the IRS’s official W-4 — such as removing the IRS’s language and replacing it with his or her own — then the form is invalid. Further, the form is invalid if on the date that the employee submits the form, he or she clearly indicates that it is false.
A few more instances in which a W-4 is invalid:
- The form is missing information, such as Social Security number, filing status and signature.
- The form is illegible.
- The employee claims both allowances and “exempt” (it must be one or the other).
- The employee gives you a substitute W-4, developed by him or her.
In such cases, ask the employee to submit a valid W-4. Until the employee submits a valid form, withhold federal income tax from his or her wages based on single filing status and zero allowances. If you have a prior valid W-4 on file for the employee, you can use that form instead of withholding at “Single-0.”
What if the employee’s withholding amount appears to be wrong?
From your vantage point, it may seem as though the employee’s withholding conditions are incorrect. For instance, he or she may appear to be claiming too many or too few allowances.
In that situation, withhold federal income tax according to the withholding conditions stated on the form; do not change anything. If the employee seems to have too little taxes coming out of his or her wages, explain to him or her that the IRS might assess the situation and order you to withhold at the appropriate rate. The IRS issues this directive via a lock-in letter.
Depending on the situation, the lock-in letter may state the maximum number of allowances the employee can claim, the permitted filing status or whether the employee is entitled to claim exemption from withholding. Give the employee his or her copy of the lock-in notice and implement the changes according to the instructions in the letter.
The employee cannot decrease his or her withholding once the lock-in letter goes into effect — only the IRS can change the terms of the letter. If you allow employees to make W-4 changes via an online system, make sure those subject to a lock-in letter do not have the ability to decrease their withholding online.
A Useful Tool to Share With Employees
Not sure if you’re withholding the right amount? Use the IRS Withholding Calculator to perform a Paycheck Checkup!