Employee Errors Completing W4
Employee's can run into tax issues if they are not cognizant when completing their W4. Encourage your employees to use the IRS Withholding Calculator for help in determining how they should complete their W4's. Be careful not to give your employees tax advice or any direction really as to how to complete their W4.
For Background: Federal & Colorado withholding taxes are calculated based on an employee's W4, the employer's pay frequency, and IRS/State withholding tables. A common issue occurs when an employee is only working part-time, but had not utilized the "Two-Earners/Multiple Jobs Worksheet" on page 2 of the W4. The employee very well may not be earning enough in the pay period to withhold any Federal or State income taxes from their paychecks unless the employee has requested an additional amount be withheld using box 6 on the W4.
Why Not Enough Taxes Were Withheld?
- Too many allowances claimed
- Not accounting for work being performed for more than one employer
- Not accounting for other earnings from other sources
- Not aware that a parent/guardian is claiming you as a dependent
- Marital Status selected, but there are Two Earners
- Marital Status selected, but legally separated filing individually
- Claiming Exempt because you a tax refund in the past, but not accounting for increased income in current year
Errors That Could Have Been Prevented:
- Bad handwriting leading to invalid recording of SSN’s, address even allowances
- Employee Not Completing Bottom portion of W4 form
Please encourage the use of the IRS Withholding Calculator:
IRS Calculator Video: https://youtu.be/aXCzzk0RYmk
Form W4: http://www.businessasap.com/onboard-new-employees/
IRS Circular E: https://www.irs.gov/pub/irs-pdf/p15.pdf