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Employee Withholding Issues

Is your employees’ withholding still wrong? Even employees who used the new W-4 may still have the wrong amount of FIT withheld from paychecks. And who will they blame when they file their 1040s and get a notice from the IRS? Themselves or Their employer—or both. Three major causes:

1. The employee did not submit the new W-4. Federal Income Tax Withholding (FITW) based on the old W-4 is likely to be wrong if an employee has two jobs or files married filing jointly and the spouse also works.

2. The employee submitted the new W-4 but did not complete it properly. Here, too, the problem is likely to be that the worker has two jobs or is married filing jointly and the spouse also works.

3. The employee’s income or circumstances change during the year due to a birth, adoption, marriage, or home purchase or a significant change in income.


The solution is to have the employee fill out and submit a new W-4, ensuring they use the second step on the form (Multiple Jobs or Spouse Works) using the IRS.gov estimator tool or the Withholding Worksheet. Hint: This will work properly only if all income has similar amounts. Otherwise, the employee may have overstated the withholding to take place. This means the employee will have less money in their pocket, lets the government borrow that extra money for free, and the employee will most likely receive a large refund in the next year.

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