Possibly. A Form W-4 remains in effect until an employee gives you a new one – except when an employee claims to be exempt from income tax withholding. It can be confusing, which is why so many small business owners choose to outsource their payroll to payroll services.
The Form W-4 helps employers determine the amount of taxes to withhold from an employee’s payroll check. There are three instances when employees need to complete a new W-4:
- When hired. Ask all new employees to complete and sign a Form W-4 before they begin employment in your Begin withholding taxes, based on the employee’s filing status and withholding allowances as indicated on the form, with their first paycheck. If the employee claims he/she is exempt from income tax withholding, he/she must indicate this on his/her W-4. If a new employee doesn’t complete a W-4, you should withhold taxes as if the employee is single with no withholding allowances.
- When they have a situation that changes their withholding status or their number of allowances during the year. A situation could be a marriage, divorce or death of a spouse; the birth or adoption of a child; a home purchase; or a change of address – anything that changes the employee’s marital status or the exemptions, adjustments, deductions or credits the employee expects to claim on his/her tax return. When a change occurs, the employee needs to complete a new W-4 as soon as possible. If the employee doesn’t experience any changes during the year, they don’t have to complete a new form.
- When claiming an exemption from withholding. If an employee claims to be tax exempt, he/she must provide you with a new W-4 by February 15 of each year he/she wishes to claim an exemption. If, as an employer, you don’t receive a new W-4 by February 15, you should treat the situation as if you have no W-4 on file. You would withhold taxes for the employee at the single filing status with no exemptions.
If an employee gives you a new W-4 that replaces an existing form, you should begin withholding taxes based on the new changes by the first payroll period that ends on or after the 30th day from the date you received the new W-4 from the employee. For additional information on the Form W-4, including exceptions and invalid forms, refer to the Publication 15 Circular E, Employer’s Tax Guide.
Note: Employers must keep copies of the most current Form W-4 on hand for all employees.
At The Payroll Department, we know that withholding taxes can be downright confusing and overwhelming sometimes to small business owners. So let us help you. The Payroll Department can manage the collection of your business’s withholding taxes and distribute them to the appropriate government agencies, so you don’t have to stress about whether or not you’re doing everything correctly. Talk to us today to learn how we can make your payroll easier for your business.
– Ariane of The Payroll Department blog team