PAYROLL TAX WITHHOLDING AND FORM W4
Updated July 27, 2006
Sending Copies of Forms W-4 to the IS -Under the temporary regulation TD (Treasury Decision) 9196 published April 14, 2005, employers are no longer required to submit a copy of any Form W-4 on which an employee claims more than 10 withholding exemptions. In addition, under the temporary regulations, employers are no longer required to submit a copy of any Form W-4 on which an employee claims complete exemption from withholding for the taxable year if the employer reasonably expects, when the Form W-4 is received, that the employee's wages from that employer will usually be $200 or more per week. Instead, an employer must submit a copy of any currently effective withholding exemption certificate only if directed to do so in a written notice to the employer from the IRS or if directed to do so under any published guidance. As under existing regulations, the written notice may direct the employer to submit copies of Forms W-4 for certain employees. The temporary regulations also authorize the IRS to provide specific criteria for those Forms W-4 that must be submitted either in a written notice to an employer or by published guidance. For tax purposes, copies of all Forms W-4 should be retained for a minimum of seven years.
Forms W-4 for Employees that Claim Exemption from Withholding - If any employees (including students) fill out Form W-4 indicating that they are exempt from withholding, such W-4 is only valid for one year. We must obtain a new Form W-4 from these employees by February 15th each year. If a new W-4 is not received each year, then we must withhold payroll taxes on these employees as if they were single with no exemptions.
Forms W-4 for New Employees - We should have a Form W-4, withholding allowance certificate that specifies the number of exemptions and the marital status for every employee. If a new employee refuses to provide a Form W-4, then we must withhold payroll taxes on the employee as if the employee were single with no exemptions.
Invalid Forms W-4 - If we receive an invalid Form W-4, then we must withhold payroll taxes on the employee as if the employee were single with no exemptions. Invalid Forms W-4 are defined to include W-4s as follows:
Any alteration of the Form W-4 relating to the perjury statement,
Any writing on or attachment to the Form W-4 other that the entries requested, and
Any Form W-4 that the employee clearly indicates to be false by oral statement or by written statement (other than a statement made on the W-4 itself).
Forms W-4 for Foreign Employees - Special rules apply to nonresident alien employees. Such rules are explained in University Payroll Tax Guideline #104.
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