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Form W-4 Employee's Withholding Allowance Certificate

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IRS Form W-4

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These frequently asked questions and answers are provided for general information only and should not be cited as any type of legal authority. They are designed to provide the user with information required to respond to general inquiries. Due to the uniqueness and complexities of Federal tax law, it is imperative to ensure a full understanding of the specific question presented, and to perform the requisite research to ensure a correct response is provided.

 Can employees change their Forms W-4 in mid-year to increase their withholding exemptions, even though their marital status and number of dependents have not changed? For example, an employee revises his Form W-4 to increase his exemptions from three to nine or repeatedly changes his Form W-4.

 Employees sometimes claim exemption from withholding on their Forms W-4. What are the applicable rules?

Can employees change their Forms W-4 in mid-year to increase their withholding exemptions, even though their marital status and number of dependents have not changed? For example, an employee revises his Form W-4 to increase his exemptions from three to nine or repeatedly changes his Form W-4.

No. Every employee must furnish to the employer a signed withholding exemption certificate (Form W-4) on or before the date of employment. The Form W-4 must indicate the employee's marital status and the number of withholding exemptions claimed. This number should not exceed the number to which the employee is entitled. A married employee can claim an exemption for a spouse only if the spouse does not have in effect a Form W-4 claiming his or her own exemption. Code section 3402(f)(1)(B). If the employee fails to provide a Form W-4, the employer must withhold as if the individual were single with no withholding exemptions. Section 31.3402(f)(2)1(a), Employment Tax Regulations.

Publication 505, Tax Withholding and Estimated Tax, provides detailed instructions for completing Form W-4. Pub. 505 and Pub. 919 provide information about determining the correct amount of income tax withholding.

Employees may amend their forms W-4 if their situations change. Some of the reasons to add an exemption would be if an employee gets married (provided the spouse does not work and claim his or her own exemption) or if a child is born or adopted. Section 31.3402(f)(2)-1(b), Employment Tax Regulations.

The purpose of completing the Form W-4 is to have the right amount of tax withheld. Sometimes this cannot be done simply by claiming an exemption for each member of a family. The employee may be entitled to additional withholding allowances, as provided in the regulations. Code section 3402(m) , section 31.3402(m)1, Employment Tax Regulations. For instance, the employee might have deductions and credits which will significantly reduce taxable income. To benefit from extra allowances, the employee must have in effect with the employer a Form W-4 claiming additional allowances.

The employee may also be entitled to fewer exemptions or need to have additional tax withheld if, for instance, the employee has additional sources of income, such as self-employment or investment income. Form W-4 is also used to authorize additional withholding. See Publication 919.

Any unauthorized change or addition to a Form W-4 makes it invalid. This includes taking out the language by which the employee certifies that the form is correct. A Form W-4 is also invalid if, by the date an employee gives it to the employer, he or she indicates in any way that it is false. An employee who files a false Form W-4 may be subject to a $500 penalty.

An employer should not knowingly use an invalid Form W-4 to calculate withholding. The employer should tell the employee it is invalid and ask for another one. If the employee does not provide a valid one, the employer should withhold taxes as if the employee were single and claiming no withholding allowances. However, if a prior Form W-4 is in effect with respect to the employee, the employer should continue to withhold in accordance with the prior form. Sections 31.3402(f)(2)-1(e) and 31.3402(f)(5)-1(b), Employment Tax Regulations..

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Employees sometimes claim exemption from withholding on their Forms W-4. What are the applicable rules?

An employer is not required to deduct and withhold income tax upon payment of wages to an employee if the employee has filed a valid certificate of exemption from withholding. An employee may claim exemption from income tax withholding if he or she (1) had no income tax liability last year and (2) expects to have no tax liability this year. Code section 3402(n). See the Form W-4 instructions for more information.

An employee must submit a Form W-4 to the employer each year by February 15th to claim exemption from withholding. If the employee does not provide a new Form W-4, the employer must withhold tax as if the employee were single with zero withholding allowances.

The employer must send the IRS copies of Forms W-4 received during the quarter from employees claiming (1) more than 10 withholding allowances or (2) exemption from withholding when the employee's wages are usually more than $200 per week. Section 31.3402(f)(2)-1(g), Employment Tax Regulations. See also Publication 15, pp. 12-13.

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