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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Filing exempt on W-4
Expert: John Kirk, CPA
Date: 10/1/2008
Subject: Filing exempt on W-4
Question
QUESTION: I do the payroll for a small company and I have employees who insist on switching back and forth from exempt on their W-4's. Should I be reporting these individuals to the IRS? I am considering telling them that they cannot change their W-4 during the year starting in 2009.
ANSWER: Under Reg. 31.3402(f)(2)-1(c) an employee who claimed "no liability" must file a new W-4 within 10 days from the time he anticipates that he will have no liability in the current year. This would prevent anyone who claimed exempt to switch back to exempt after switching once. There are also civil and criminal penalties for providing employers with false information (see code sections 6682 and 7205)
If you hand these employees copies of the above sited code section, that may put an end to the switching.
John Kirk, CPA
www.johnkirkcpa.com
---------- FOLLOW-UP ----------
QUESTION: Should I be forwarding information to the IRS concerning employees switching back and forth?
Answer
No, the only thing you can do is provide them with the possible penalties they are subject to by submitting false information to the employer.
If you as an employer know that the information they are providing is false, you can refuse to receive that information.
But you need to know that it is false, the service will catch up with them upon review of their return as insufficient taxes would have been withheld.
John Kirk, CPA
www.johnkirkcpa.com
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