W-4 Wage Withholding – Does The Employer Have To Report Employee if They Claim More 10 Allowances?


Michael Lodge

by Michael Lodge

Every year when people come into the office to have their taxes prepared the same subject always comes up – the W-4 and how much to claim.  Today we are going to address the issue of those bold employee’s who want to claim the highest amount of exemptions.  How does it trigger a review by the IRS in certain cases.

QUESTION:  If an employee claims more than 10 allowances on their Form W-4, does the employer have to report this to the IRS?

As of now the IRS says the requirement has been eliminated.  But!  there is always a but to the IRS.  The W-4 – Employee’s Withholding Allowance Certificate, are still subject to review.  Employers may be directed (in a written notice or in future published guidance) to send certain Forms W-4 to the IRS.  The IRS will also continue to review employee withholding compliance.  The IRS may send you a letter (commonly called a lock-in-letter) specifying the withholding rate and allowances to use to calculate the amount of tax to withhold from wages paid to a specific employee.

So the basic answer is – the IRS is watching both the Emplyee and the Employer on what is the appropriate amount of employee withholding needs to be made to be in compliance with the IRS rules and many regulations.  The other answer is – ask your tax accountant what you should do so that at the end of the year you are not surprised when you get a tax bill because you have not taken enough taxes out of your payroll.

If you have any questions – send an email to:  tax@icontaxgroup.com