Collecting W-4s | Payroll Management

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.
If employees seem to be taking the process too lightly, you may need to inform them that an individual who files a false W-4 form may be subject to a $500 penalty.
So what is your responsibility if you are given an invalid W-4? Don’t use it. Instead, tell the employee that the form is invalid, and instruct him or her to fill out a new one. If a new, valid form is not received, withhold taxes at the highest rate (as if the employee is single and has no withholding allowances). Or, if you have an earlier W-4 form that is valid, you can withhold according to that form.

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

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Responsibilities When Collecting W-4s