By Steve Kania of SurePayroll
The Employee’s Withholding Allowance Certificate (Form W-4) gives your business clients four crucial types of information:
• Whether to withhold taxes at the single or married rate
• How many withholding allowances are claimed
• Whether the employee wants any additional amount withheld
• Whether the employee is claiming to be exempt from withholding
All employees should complete a Form W-4 when they are hired. Employees need to fill out a new form if they get married, or if they’re withholding too much or too little from their paychecks. A payroll calculator can help figure out how withholding status would affect a paycheck.
Here are some other key factors your clients should be aware of when dealing with the W-4:
• If a new employee does not complete a form or the form is invalid, the employer must withhold as if the employee were single with no allowances.
• If allowances increase (adoption or childbirth), employees can submit an amended form.
• If allowances decrease employees must submit an amended form within 10 days. Circumstances where this might occur include:
o Divorced or legally separated
o No longer supporting a dependent
o Nonworking spouse take a job
• Employers are required to monitor employees for changes that decrease allowances.
• The death of a spouse doesn't affect withholding marital status until the next year.
• Employer should notify employees by December 1 that they need to amend the form if their filing status or number of allowance has changed.
• Changes cannot be made in advance.
• Any change submitted by an employee to an employer must be reflected no later than the first period ending on or after the 30th day after the form was received.
• If form is invalid or incomplete the employer should not use it to calculate taxes.
• Employees can be exempt from withholding taxes.
In my next post, we’ll discuss how employees can be exempt from the W-4.