Employees don’t always take the task of filling out their W-4 forms seriously. They may write “exempt” on the withholding portion of the form, or even claim a false high number of withholding allowances to ensure that no federal or state tax is withheld.
When Employees Ask Your Advice
The W-4 form itself offers some guidance. Here are some questions to help the employee determine if he or she can legitimately claim to be exempt from withholding:
Invalid W-4s According to the IRS, a W-4 form is invalid if any unauthorized addition or change is made to it, or if the employee indicates in any way that the information on the form is false. |
1. Did the employee have a tax liability in the previous year? If the employee received a refund of all federal income tax paid (or had a right to a refund), he or she may be able to claim exempt, depending on the answer to the next question.
2. Does the employee expect to have a tax liability this year? To determine the answer, ask these questions:
a. Can the employee be claimed on someone else’s income tax return this year (such as a parent)?
b. Will the employee’s income for 2013 exceed $1,000 and include more than $350 in unearned income (such as interest or dividends)? If the answers to both a and b are yes, the employee may have a tax liability for the year, and cannot claim to be exempt from