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Welcome to “Ask Teri Taxes”!
by Teri Kaye, CPA
  This column is designed to answer tax questions that are common to many taxpayers. Each issue of BizAction will feature one of the questions I receive. Of the many questions received I selected one from Alan for this inaugural issue because it applies to so many businesses and the rules in this area recently changed.
Alan asked: What is the responsibility of the employer when an employee requests zero federal income tax withholding? What if the employee provides a Form W-4 with a high number of dependents or other information that appears inaccurate, such as a 19 year old with 6 dependents?
Teri Talks Taxes: When you hire an employee, you have several obligations:
  1. Verify their eligibility for employment by completing Form I-9, Employee Eligibility Verification. You can obtain this form by calling 1-800-870-3676 or by clicking on the “Form” link at website You must see the applicable documents noted in the instructions and document that you saw them on Form I-9. Form I-9 must be retained either for three years after the date of hire or for one year after employment is terminated, whichever is later. The form must be available for inspection by the authorized U.S. Government officials.

  2. You must also report that you hired a new employee to your state’s New Hire Registry. Call the Office of Child Support Enforcement at 202-401-9267 or visit its website at for each state’s rules.
  3. Obtain a signed Form W-4 from your new employee.
    If you receive a Form W-4 with any unauthorized change or addition, request that your employee complete a new Form W-4, without the change. A Form W-4 is also invalid if, by the date an employee gives it to you, he or she indicates in any way that it is false. An employee who submits a false Form W-4 may be subject to a $500 penalty.
    If you get an invalid Form W-4, do not use it to figure federal income tax withholding. Tell the employee it is invalid and ask for another one. If the employee does not give you back a valid one, withhold taxes as if the employee was single and claiming no withholding allowances. However, if you have an earlier valid Form W-4 for that worker, withhold as provided under the earlier valid Form W-4.
    In the past, you had to mail any Form W-4 to the IRS if the employee claimed complete exemption from withholding with $200 or more in weekly wages or if the employee claimed more than 10 allowances. Employers no longer have to routinely send copies of such Forms W-4 to the IRS. However, Forms W-4 are still subject to review by the IRS. When requested by the IRS you must make specified original Forms W-4 available for inspection by an IRS employee. You may also be directed to send certain Forms W-4 to the IRS.
    After submitting a copy of Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4, if it is valid. However, if the IRS later notifies you in writing that the employee is not entitled to claim exemption from withholding or a claimed number of withholding allowances, withhold federal income tax based on the effective date and maximum number of allowances specified in the notice. If the employee provides you a new Form W-4 claiming fewer withholding allowances than provided in the letter from the IRS, you can withhold based on the revised Form W-4.
So, as a responsible employer, provide a blank Form W-4 to each employee. When they turn in the Form W-4, unless they indicate the information is false, you are under no obligation to verify the information. You do not need to report anything to the IRS unless requested to do so.

If your question is more personal in nature or you need an immediate answer, I am happy to provide individual consultations. If you would like additional information about this, or any tax topic, contact “Ask Teri Taxes” at

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