Employees have varying levels of understanding of the various forms they fill out when starting a new job, but employers must have a thorough understanding of the employment forms they need to comply with local, state, and federal employment laws. Don’t settle for a vague understanding of the forms you use for employee recordkeeping and payroll tax reporting, especially income tax withholding forms. Employees and employers alike need to know what is required when completing withholding forms.
Many people believe that withholding forms have to be filled out with ink, but this is not specified on the IRS federal W4 form. While it’s generally better to fill out any legal forms with ink and not pencil so signature and selections can’t be easily changed, it’s not a legal requirement for payroll tax reporting. Filling out W4 withholding forms in ink is generally an employer instruction. The form can even be filled out online and signed with an electronic signature, which is common with payroll services that include paperless processes through Applicant Tracking, Onboarding and Employee Self Service solutions.
Withholding forms have instructions and a perjury statement “Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete.” Online forms must also include these statements; if not included, they are not considered authentic, and will not pass an IRS audit.
Most State forms filled out electronically are allowed on the same basis as the federal forms and are a good step toward automating recordkeeping and going paperless. It can eliminate error and improve legibility for better recordkeeping.
Withholding forms are definitely included in IRS audits. Employers are required to retain Form W4 for no less than four years from the date taxes were due based on the form completion date.
As an employer processing payroll, you’ll want to get a withholding form from every employee in order to comply with employment and tax laws. There are rare occasions when a W4 may not be required, as in the case of an employee who is eligible for IRS Forms 673 or 8233.
A common assumption is that one withholding form at the time of hire is all that is necessary for an employee’s file. Employees, however, can change their withholding at any time with a new Form W4, and all forms should be retained according to the requirements outlined above. Change of status such as marriage or adding dependents, or changes in address are all reasons an employee might complete a new W4 form. While it is not a requirement to have employees fill out a new withholding form every year, it is suggested that employers have employees review their current W4 selections and update if necessary or desired.
Many payroll services can simplify the W4 process with reports that allow employers and employees to review and update W4 information on a regular basis. In addition, requests and approvals for changes to this information are commonly available through Employee Self Service solutions.
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