Q. When hiring employees who we know are claiming excessive/nonexistent dependents on their W-4 to avoid paying federal income taxes and hoping not to be held accountable, do we have the right to have them produce some form of proof of the dependents? – Debbie, Tennessee
A. Prior to 2005, in an effort to combat tax avoidance, the IRS required any W-4 listing more than 10 personal allowances to be filed with the IRS. However, beginning in 2005, the IRS abandoned that practice in favor of a different process. Now, employers are directed that they should not knowingly use an invalid Form W-4 to calculate withholding.
If you know, you must tell the employee when a W-4 is invalid and ask for another one. However, the guidance is not all that clear. The rule says you are supposed to follow an employee's instructions unless you know the W-4 is fraudulent, which you can only know if the employee actually tells you. At the same time, the IRS also says you should know it is probably not correct.
As a practical matter, you can question the employee and remind them that filing a false W-4 is punishable by a large fine and potential jail time. And if they still want to implement it, so be it. The most likely response is a “lock in” letter from the IRS that will increase withholdings to the maximum and overrides any W-4s.
Like what you've read? ...Republish it and share great business tips!
Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...
We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.
The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.
" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/14380/how-can-we-investigate-fraudulent-dependents-on-employee-w-4-forms "
- Isolated incident or slight doesn't add up to retaliation
- Look at duties—Not job title—When determining FLSA status
- What if we can't set up direct deposit fast enough to deliver final paycheck in time?
- Handle terminations with dignity, due deliberation
- Safety violations cost Cintas $3 million in 3 months