To comply with federal regs, employers must send all workers an important message by Dec. 1.
IRS regs say Payroll must remind employees by 12/1/09 to file an amended Form W-4, Employee’s Withholding Allowance Certificate, if their filing status, exemption allowances or exempt status has changed since they last filed the form. A simple e-mail or paycheck stuffer will do the job. [IRS Regulations Section 31-3402(f)(2)-(1)(c)(3).]
For the procrastinators, there’s a grace period. Exemptions for 2009 don’t expire until 2/15/10. That means, though, that anyone who claimed “exempt” on the W-4 last year but didn’t provide an updated W-4 must be withheld from at the single marital status with zero withholding allowances, starting on 2/16/10. Changing the withholding is usually enough to get an employee’s attention – and have the person provide a new form, pronto.
To cut down on the number of employee questions, it may be useful to provide a copy of Publication 919, How Do I Adjust My Tax Withholding? That’ll help them decide whether the amount they’re having withheld compares to their projected total for the year. This will be especially important for those with earnings exceeding $130,000 (single) or $180,000 (married), so they can make sure they’re not underwithheld.
Note that employees can’t claim exempt if:
• Their income exceeds $950 and includes more than $300 of unearned income (e.g., interest, dividends), and
• Another person can claim them as a dependent on his or her tax return.
While it’s not Payroll’s job to police who claims exempt and who doesn’t, you may keep some people out of trouble with IRS if they’re aware of the guidelines.
