W-4 Question

Crout

I saw something today that I don't believe I've ever seen. We have a FT, non-exempt making a base hourly wage of $8.04. I just saw the EE's W-4, and he indicated that he was claiming one deducation (himself), but also that he was Exempt from Federal income taxes (box #7 on the W-4). I have no way of knowing of course, but obviously I suspect that he is trying to cheat on his taxes. What is my responsibility as an HR professional and also to my company? Thank you, and may you all have a wonderful holiday.

mushroomHR

We had a few employees do this, thinking they didn't have to have tax withheld because at the end of the year they would get it all back due to various exemptions. Our payroll people contacted the IRS and were told that the employee still had to have tax withheld even though they may be entitled to a full refund when they file their taxes. This employee thought they were one of those radicals who didn't have to pay taxes. We told him he still had to have the tax withheld. Other than this example, I'm not aware of a reason why you would not withhold taxes for an individual. Contact the IRS and explain your situation to them and they will advise. Maybe others have had this happen and can advise.

Down_the_Middle

The easiest way to address this issue is to withhold what the employee states and stop trying to police the issue. It is ultimately the wage earners issue and as long as the employer acts in good-faith (with a signed W-4), that's the extent of your responsibility. Having seen many of these types of things over the years, I do remember the time that the employer got in "hot water" by trying to impose a change in withholding exemptions due to "information" the employer had. The judge was quick to point out that the employer acted upon an area they had no responsibility with. It was a lesson learned.

LindaS

My understanding is that if an EE claims "exempt" from withholding you are required to honor the exemption but you are to forward the W-4 to the IRS.

twochr

When my children were in college, they only worked during the summer months. They were full time during that period. They could check the exempt from taxes box since it says on there that if you did not owe any taxes last year and do not expect to owe any this year, you can be exempt. They never made enough money during the summer to pay any taxes. This was checked out thru the IRS and it was okay with them.

JudyT929

If he says exempt you don't withhold taxes. Anytime an employee claims exempt or claims 10 or more exemptions you are required to forward a copy of the form to the IRS, let them worry about it.

System

I agree with Down-the-Middle and LindaS, and would emphasize that the IRS get a copy of the W2.

It's the employee's responsibility to pay the taxes if they are due. We are not agents of the IRS to investigate whether or not someone is paying their fair share. It's our roll to forward the amount that's withheld.

seeleyhr

I have had people fill out W4s for a lot more exemptions than I know they had but this is their choice and I do as they request on the W4. The government receives a copy of the employee's W2 at the end of the year and it is up to the government to collect if anything is owing.

juju

Just to clarify, exemptions on a W-4 are not the same as personal exemptions claimed on a tax return. Those who complete the optional worksheet at the top of the W-4 always seems to claim more exemptions on the form than those who do not complete it. That worksheet is based on many factors, such as spouse's job(s) and salary and eligibility for certain credits. As an employer, you most likely would have no way to know if an employee was claiming more than what they were entitled.

E Wart

You may just want to confirm with the employee this is what they actually meant. These forms are very difficult for employees to understand. Odds are he will change it. If not, just go with what he says. It isn't your problem. (The exempt is for what was mentioned earlier, students or someone who PAYS no income tax... not owes no income tax.)
E Wart

LindaE

The others are right. I've questioned this, too, but have realized that this is one mess I don't have to clean up. If I see something unusual when a W4 is filled out I do confirm that the individual understands what he/she has written, but beyond that, it's between the individual and the feds.

Crout

Thanks to one and all for your input. I agree that the whole thing is between the employee and the Feds. I just wanted to make sure we were covering all the necessary bases.

National Guard

No one mentioned earned income credit. There are some people who qualify and don't have to pay taxes. If you are a single parent or HOH and have a few children the income limit is actually pretty high. Around 30,000.00. You don't have to pay taxes in that situation. It would be the ee's choice whether to reap the benefit at the end getting a large refund or take advantage of the benefit up front and not pay taxes.

Crout

Very good point. It doesn't apply in this case, (single, no kids) but a good point nevertheless.

mrbill

Interesting coments, some correct, some not. I have a dual career in that I (think) am an HR pro, and also have a Tax preparation practice. It is a wonderful compliment when dealing with employee issues, and benefits. Would heartily recommend that a course be taken, and I would even go so far as to recommend HR Block's basic course. The exempt line is only to be used for a very low income wage earner, who expects no tax liability, and expects a full refund. A summer worker is a typical example. Correct in that we cannot change a W-4, however I have had cases where an employee claims 9 / 10 exemptions and there is no basis for this claim. I simply send the W-4 to the IRS with the 941 report, with a letter, copy to the employee, asking the IRS to review. They always have, and have sent me back written advice to change to 0S. Only then do I change the withholding. For the reg's refer to IRS Publication 15 / 505. Give Thanks,