How do I complete this W-4? I want my money now!

July 11, 2017|Janet Daniels

Completing Form W-4 can be a daunting process for new employees. As an employer, you are limited as to the guidance you can provide. Learn more about your W-4 compliance requirements.

How many times have you, as the human resources manager, office manager or business manager, been asked by your new employee, “How many exemptions should I put down? Do I want more money now or do I want a bigger refund?” It’s a tough question to answer when you truly don’t know that employee’s financial status. Another big question from the employer standpoint: When does my employee have to complete a new W-4?

Let’s start with the employer question: When does an employee have to complete a W-4?

New hires should complete Form W-4 on or before their first day of work. If you do not receive a completed and signed W-4 from the new hire, you must withhold federal and state taxes as if the employee is single with zero exemptions (S/0). Having the employee give verbal or written instructions on what they want to claim is not enough to set up or establish the employee’s withholding allowances.

If an employee wants to change their number of exemptions this should be done within 10 days of the life change, such as marriage, divorce or the birth of a child. If an employee feels they are entitled to file exempt, an updated W-4 must be completed and signed.

Now on to the common employee question: How many exemptions should I put down?

All employees must complete lines 1, 2, 3, 5, 6 and 7 (or 1, 2, 3, 4, and 7 if the employee is claiming exempt), as well as sign and date the form, to validate the W-4. Lines 3, 5, 6 and 7 influence the amount of federal taxes that are withheld from the employee’s paycheck, and are nearly always the section where employees have the most questions.

Employees can complete a deductions and adjustments worksheet on page 2 of the W-4 to use as a “guide” to figuring out how many exemptions they should take. Anyone can claim zero to 99 exemptions, with zero exemptions being the most amount of taxes deducted. As the exemptions increase, the fewer taxes are deducted from an employee’s pay.

If an employee status is single with zero exemptions they will have more taxes deducted than an employee filing married with zero exemptions. A basic rule of thought on this is that someone who is married would have a family to support so they would “require” more money to provide for their family than someone who is single, so less taxes are taken for that married status employee.

For each allowance claimed, this will reduce the amount of wages that are subject to federal income tax. Employees who want to have the highest amount of taxes deducted and want to have an additional dollar amount deducted from their pay can complete line 6 of the W-4. An employee cannot claim a percentage of wages nor a flat amount instead of entering the total number of allowances.

If an employee feels they are entitled to file exempt they must complete lines 1, 2, 3 and 7. Remember this exempt status is only effective for a year and does expire; the employee needs to update their W-4 by February 15 (or the next business day if the 15th falls on a holiday or weekend) of the following year. Exempt status does have an expiration date, unlike an employee claiming zero to 99 exemptions. If an updated W-4 is not received by February 15 of the next calendar year, then the employer should withhold federal taxes as if the employee is single with zero exemptions (S/0) until an updated form is received from the employee.

 

Remember that you should not give tax advice to your employees; however, there are a few resources you can offer:

For more information, contact your payroll specialist at 800-236-2246.


Janet Daniels is a payroll specialist in Schenck’s Appleton office. She has been with Schenck for more than two years.