Among the many forms new hires fill out is the federal W-4 form. As you probably already know, this is the form that employers use for withholding and reporting purposes. How a new hire fills out this form directly affects the amount of federal income tax and FICA withheld and submitted to the IRS. And of course, employees can submit new W-4 forms at any point should their circumstances change.
As an employer, you have someone designated in the HR or payroll department who looks over W-4 forms to make sure they have been completed properly. What does that person do if a new form does not look quite right? That depends on the cause for concern. Are there actual errors on the form, or does it just appear that the employee may not be taking advantage of tax savings?
Your Legal Obligations
As the employer, you have certain legal obligations related to the W-4 form. First and foremost, you must obtain a completed form from all new hires. That form must be kept with the employee's personnel records and used for withholding and reporting purposes.
Next, you are required by law to use the numbers on the completed form for withholding and reporting. No one in your HR or payroll department can change those numbers on behalf of the employee. Once an employee completes and signs a W-4 form, it becomes official. Altering the form or filing a new one on behalf of the employee without that person's consent – via his or her signature – is illegal.
In short, you must adhere to the numbers on the form whether you agree with them or not. There are only two exceptions: a W-4 form that is invalid or receiving explicit instructions from the IRS to disregard a submitted form.
Spotting an Invalid Form
A W-4 form can be invalidated in any number of ways. The most common reason for invalidation is altering the form by making any additions to the official language or attempting to strike language from the form. These are easy problems to spot. If an employee makes any physical alterations to a W-4 then it is quite likely invalid.
Other circumstances that may invalidate a W-4 form include:
• knowingly dating the form incorrectly
• missing information (e.g., Social Security number, filing status, etc.)
• improperly claiming both allowances
• submitting a form other than a bona fide original or copy thereof
• submitting a form that is illegible.
Submission of an invalid W-4 does not relieve the employer of the responsibility to withhold and submit income tax and FICA. Federal law dictates the employer withhold based on single filing status with zero allowances until a valid form is submitted.
Assisting with Valid Forms
Let us assume one of your new hires doesn't seem to have claimed the right number of allowances. Once the form is completed and signed, your hands are tied. You cannot change the form or withhold a different amount. But you can offer some assistance.
A knowledgeable HR or payroll employee can sit down with that worker and explain how the W-4 and its allowances actually work. The employee can also advise the worker about how to best fill out the form for maximum tax advantage. Then, if that worker consents, a new form can be completed and signed.
The W-4 form has a history of causing consternation for both employers and employees alike. Knowing that the IRS has revamped the W-4 to comply with 2017 tax legislation doesn't make things any easier. Still, that does not relieve employers of their legal obligations.