We have had an uptick in questions regarding the Form W-4 and the changes that were enacted December 2017. To help our clients and others keep up with the changes in withholding that was a part of the tax reform signed into law back in December, here is a quick guide to resolve any questions you may have.
- What is Form W-4?
This form is complete by the employee and is used to determine the correct withholding amount the employee is responsible for by taking into account the employee’s marital status, income earnings, and number of dependents.
- When Should Employees Submit Form W-4?
All new employees should complete a Dorm W-4 during their intake process. It is strongly recommended for employees to review and update their W-4’s by the end of the year to reflect any changes in marital status, financial status, or dependents. All changes must be made and submitted by February 15th of the year for which the employee is claiming the exemption.
- What if an Employee Doesn’t Complete or Update Form W-4?
Although the forms should be completed at the time on onboarding, there may be a reason why the employee was unable to complete the Form W-4. In this instance, the employer should withhold taxes as if the employee is single with zero exemptions. If a W-4 has not been updated then the employer should base the withholding amount on the most recent W-4 they have on file for that employee.
- Who is Responsible for Accurate Withholding?
There is a shared responsibility between employer and employee to ensure that federal and state taxes are withheld. It is the employer’s responsibility to ensure the Form W-4 is completely filled out and signed and to accurately withdraw the taxes based on the calculations from the W-4. It is the employee’s responsibility to pay the taxes they owe and ensure they have completed or updated their W-4 to accurately reflect their situation.
Overall, the best approach to handling and managing Form W-4’s is to have all new employees fill out the form as part of their onboarding and moving forward, having all employees review and update their W-4’s as necessary annually. This ensures that you, the employer, has the most accurate information reflected on the employee’s Form W-4 – which means the most accurate withholding from their paycheck and fewer headaches for employees or for you if something were amiss. If you need a copy of the updated Form W-4, you can find it here.