Re: Details on the IRS's new W-4 policy
Robert G. Randall II
Dec 21, 2005 19:14 PST
| ||This is a pretty big change, especially with the threatened
will certainly want to hear if salaried resisters are
feeling the pinch
and how consistently the policy is carried out.
I'm not sure this is such a big change.
The threatened fines are the already existing $500 civil
penalty for filing a W-4 claiming excessive allowances. The
IRS' ability to assess this penalty has been there all
along; the question is whether or not this represents a
change in the likelihood that they will actually assess it.
Or is this just another tax season (it is time for the 1040
forms to go out) scare story of the type which the media
runs every year to assist with IRS compliance efforts?
(Perhaps not, or the article would have mentioned the
possible year in jail and $100,000 fine (!) for "willfully
supplying false or fraudulent information" on a W-4 which
decreases the amount of withholding. This is the potential,
but so far extremely unlikely, criminal penalty if
prosecuted for W-4 resistance.) Does anyone know anything
about Market Watch? The website comes across as a pretty
generic personal investment/financial news site.
The so-called "lock-in letter" is also not new. The IRS
has always had the right to direct one's employer to
withhold at a higher rate once it has decided that your W-4
is inaccurate or inadequate. And NWTRCC has always informed
people of that. See page 5 of our Practical War Tax
Resistance #1, "Controlling Federal Income Tax Withholding".
Even the part about employer liability for the taxes is
not new. See page 4 of the same pamphlet referenced above.
Once an employer has knowledge that a W-4 is claiming
allowances not permitted under IRS rules, the employer who
fails to act on that knowledge is liable for civil and
criminal penalties, and, I'm almost certain, that liability
includes the unwithheld tax amounts. This is why we've
always counseled wtr's not to tell their employers why they
are filing a new W-4.
Interestingly, the tone of this article seems opposite
the newly released IRS policy which lightened the employer's
responsibility to alert the IRS of questionable W-4's, as
reported in More Than A Paycheck just this past June.
However, the procedure in the second paragraph of the
article (below) is consistent with the new policy as
reported in June.
I suspect this entire article is just a re-casting of
long-existing tax law and IRS regulations, reported in a
different lingo than what we are used to seeing.
As Ruth says, we'll have to wait to see if there is
actually any change (i.e., "crackdown") in what is happening
to us -- unless someone knows an IRS agent who can vouch
that they've recently received new instructions and training
on this. In other words, I'd be more interested in seeing
new language in the IRS Policies and Procedures Manual
before assuming that this story describes a substantive
change. OTOH, it is clear that the IRS under Bush has been
much more likely to pursue and collect than it had been
doing for several years prior. So perhaps there is
something to this, but I sure wouldn't panic over it yet.
Can't pay for killing in
Sent: Tuesday, December 20, 2005 10:49 PM
Subject: [wtr-s] Details on the IRS's new W-4 policy
Keeping a bigger piece: IRS tightens rules on paycheck
By Eva Rosenberg, MarketWatch
LOS ANGELES (MarketWatch) -- The IRS is cracking
down on employees who have too little tax withheld from
and will also put employers in its sights if they try to
underpaying workers by endorsing questionable W-4 forms.
Instead of just relying on the W-4s
themselves, the IRS will start looking at individual tax
determine who is not having enough withheld.
If you have a balance due and you don't
pay those taxes when you file your tax return, the first
thing IRS will
do is to look at your W-2s to see how much total federal
income tax was
withheld. If it is clearly inadequate, both you and your
be getting letters from IRS telling you to file a new W-4 to
is a form you file with your employer, declaring how many
are entitled to based on your projected income and the
deductions you'll be allowed to take when you file your
return. The more exemptions you claim, the lower your
If the IRS asks for the new W-4
and you don't reply, or if IRS rejects your calculations on
the form, a
"lock-in" letter will be sent to you and to your employer
freezing your withholding at the rate IRS requires.
If you have special circumstances
this year, respond to the letter immediately and let IRS
writing, why your situation warrants the lower deductions.
Now here's the really
tough part. If you don't comply, or if you try to get around
by filing a new W-4 or if you quit your job and start
working for a new
employer who doesn't have the IRS lock-in letter, you'll
will charge you $500 to start with, and $500 for every new
W-4 you file,
with any employer in any year until the agency releases the
of the lock-in letter it issued.
Employers, especially in a small businesses where owners
may be closer to employees, can be tempted to try to help
out by fudging
the W-4s or looking the other way when an employee files for
exemptions. They may even be reluctant to enforce the
from the IRS. That kind of attitude will now cost them.
Employers who don't enforce the W-4
compliance rules or who permit employees to file another W-4
withholding after they receive a lock-in letter will be
paying IRS all the federal income taxes that should have
In other words,
IRS is going to get their money from either you or your
employee -- you
decide who pays.