Picture courtesy of Anderson Landscape in Greeen Bay, click HERE to see more of their fantastic work
What is a W-4 form?
A W-4 is an IRS form that let's employers know how much they should deduct from the employee's pay for things that include federal and state income tax.
Employees fill out the form with their name, social security number, home address, marital status, number of allowances (generally children, but others may qualify), additional withholding desired.
Ideally, Employers should require employees to fill out the form before starting work. However, an employer must have the employee fill it out before the first paycheck is provided, otherwise, the employer, or payroll service provider won't know enough to process the paycheck. It's the employer's responsibility to make the proper deductions for withholding.
Can an employee make changes to their W-4?
Filling out a W-4 Isn't a set it and forget it form in all cases, in fact, in most cases, employees will want to change their W-4 form from time to time. All sorts of factors can instigate a change in the form that includes a change in marriage, new children, children no longer a dependant, one-time bonuses that impact how much an employee wants to have withheld, and many other reasons. Employees are free to change their W-4 as often as they wish.
How do employees submit their W-4 information to their employer?
Employers are required to have a form filled out and signed by the employee, and physically receive the form, either in person, or via mail. The IRS is begining to catch up with the times, and electonic systems that meet IRS regulations are now starting to become available and popular. That said, some states don't allow for electronic submission and/or may have their own variation of the W-4 in order to document the state withholding amounts.
It's either complete, or it's not.
As an employer, make sure the employee not only filled out the form completly, but also signed the form. A filled out W-4 form that's not signed isn't any better than no form at all. As an employer, you have the ultimate carrot, their job and paycheck, so make sure you use those motivating factors early and quick. Otherwise, you run the risk of having to do things at the last minute.
Can you just take out 25%?
Once in a while, you may get an employee that wants a flat percentage or a set dollar amount taken out. The IRS doesn't allow for anything other than using the their own withholding tables to determine the amount taken. So, the quick answer is to hand them a W-4 form and say you're required by the IRS to follow their guidelines, and are not allowed to deviate.
Filling out the W-4 form for the employee.
It's not in your best interest to fill out the form for the employee. And, it's especially important not to give tax advice unless you're (legally) authorized to do so. Otherwise, you can set yourself up for liability and exposure you don't want. The IRS has a withholding calculator employees can use on their website.
Yes, the employee may be an adult and common sense suggests they should be responsible for their own taxes, but the IRS takes a very different view. The IRS knows it's much easier (for them) to have the employer withhold taxes than to try to collect the money after the employee receives it.
When did employers have to begin withholding income taxes?
During World War II, the Current Tax Payment Act of 1943 was passed, which required employers to withhold federal income taxes from employees paychecks and have the employers pay the money directly to the government. According to the U.S Treasury "The greatly eased the collection of the tax for both the taxpayer and the Bureau of Internal Revenue. However, it also greatly reduced the taxpayer's awarneness of the amount of tax being collected, i.e. it reduced the transparency of the tax, which made it easier to raise taxes in the future."