- quote -

Ain't that the truth!! <VBG
Carol
My mind not only wanders, sometimes it leaves completely.

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- quote -

In the future I would appreciate it if you would stop
clouding the issue with either the facts or the
truth!!!!!!!!! Things like Facts, Truth, Logic and Common
Sense have no place in taxation and as professionals surely
we are obligated to not let the truth get in the way of the
issues!!!

ROTFLMAO,
Gene E. Utterback, EA

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Joe User wrote:
- quote -

That includes other methods than using the worksheets on
form W-9 which ensure that (no less than) that withholding
covers the tax due (without allowing certain predicted
losses). The question is whether employer error in
calculating withholding is an allowable adjustment.

....

- quote -

Unlcear. It appears they only have to send the DE-4 to the
EDD for review if the W-4 is NOT required to be sent to the
IRS for review,, even if the numbers are different.

This is based on the California Employers Guide from the
EDD, rather than specifically on the R&TC and regulations.

- quote -

The fact that I had been significantly overwithheld the past
few years might have suggested that they allow it, even if
it was reported.

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- quote -

LOL. I've always heard that there are three sides to every
issue: in the case of a married couple--his, hers and the
truth. Perhaps the same holds true in this situation--there
is his side, the employers side and the truth.

Carol
My mind not only wanders, sometimes it leaves completely.

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Harlan Lunsford <hlunsford[at]bellsouth.net> writes:
- quote -

You're right, I read Pub. 15 wrong. The only W4's the
employer must send quarterly are the ones with more than 10
allowances and the ones claiming exemption from withholding
when weekly wages are more than $200 per week.

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Jonathan Kamens wrote:

- quote -

Nope. From: http://www.irs.gov/taxtopics/tc753.html

After the employee completes and signs the Form W–4, you
should keep it in your files. This form serves as
verification that you are withholding federal income tax
according to the employee's instructions. Do not send it to
the IRS.

However, if you receive a Form W–4 on which the employee
claims more than 10 withholding allowances, or claims
exemption from withholding and his or her wages would
normally be expected to exceed $200 or more a week, you must
send a copy of that Form W–4 to the IRS service center with
your next Form 941 (PDF). Complete boxes 8 and 10 on each
Form W-4 that you submit. If you want to submit the Form W–4
earlier, you can send a copy of the Form W–4 to your IRS
service center.

Phoebe

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clj1219[at]aol.com78946321 (CLJ1219) wrote:
- quote -

True, in general. But that is not the context in which my
comments were made. The OP stated:

"I have an employer that is flat out categorically refusing
to accept a witholding request for > 10 exemptions (as
opposed to, say, demanding a priori a letter of explanation
to go w/ the new W4 which the IRS may in turn request from
employer)."

First, I read "flat out categorically refusing to accept"
to mean that the employer has a policy of rejecting any
"> 10" W-4. My interpretation was that the policy
applied even if the employee give no "indication" of
falseness. Arguably, on second thought, I might have
read too much into that.

Second, even if my interpretation is incorrect, the OP
said "as opposed to ... demanding ... a letter of
explanation". Notwithstanding the fact that the employer
should not make such a demand, and notwithstanding the
fact that the employer might not be obligated to forward
such a letter to the IRS ("he said with checking"), I
interpret this to mean that the OP was willing to provide
such a letter. I think that casts doubt on the theory
that the OP gave some "indication" that the W-4 was false,
or even if he did, that the OP failed to correct the
misunderstanding later.

In any case, we participants of NGs cannot expect to be
judges and juries. We only know the facts as they are
presented, which is usually only one side at best. What
we can do is explain the circumstances under which the
employer's action may and may not be warranted. I
believe that I (and some others) have done just that
(or tried to), without intending to "adjudicate" the
OP's situation.

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"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:

- quote -

I think the question is a little like "can I go faster
than the speed limit under the right conditions", and
the answer is similar.

Technically, no, you cannot adjust your allowances
to correct for perceived employer computation errors.
As I quoted elsewhere in this thread, IRS Pub 505
states about the method used to compute withholding:

"The method you use must be based on withholding
schedules, the tax rate schedules, and the [tax-year]
Estimated Tax Worksheet" in IRS Pub 505.

Nothing said about "and other adjustments that you
think are justifiable" :-).

I am presuming that Calif follows federal standards
for acceptable practices. I'm reasonably sure it does;
but admittedly, I do not know that to be true.

Nonetheless, as long as you get away with it and you
withhold the correct amount in the end, I doubt that
anyone would "haul your ass in" for embellishing the
procedure.

However, in your case, you increased your Calif
allowances to 43. Calif has the same requirement that
the IRS does: the employer should send the DE-4 to the
EDD for review. And in that case, I seriously doubt
that the EDD would accept your justification. If it
did not squawk, it was probably an oversight.

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Jonathan Kamens wrote:

(snipped a bunch here.)
- quote -

"Say what?"

Since when?

Or are you perhaps thinking of many states' requirements to
report new hires to the state department of labor?

ChEAr$,
Harlan Lunsford, EA n LA

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TaxSrv wrote:

- quote -

Since there doesn't appear to be any specific sanction or
penalties in the IRC on these issues, just what ~could~ the
federal courts do about it? It seems that the legal remedy
would be in the nature of "specific performance" or
"equitable relief," and I am not sure whether FEDERAL courts
routinely take such actions. Such remedies are more likely
available in STATE courts, yet I somehow doubt that a state
court would want to get involved in what nominally appears
to be a "federal" issue. (Maybe/hopefully some of the
attorneys around here will comment.)

MTW

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"cmkey" wrote:
- quote -

Without commenting on this directly, it's worth noting that
when W-4s 10 are sent to IRS, it takes them a couple minutes
to pull up prior years' data to see whether t/p has been
filing, and whether the allowances claimed has an apparent
rationale. So fear of IRS inquiry is misplaced if the
allowances reflect something present on prior year
return(s), rather than something like a big casualty loss.
Even there, all you'll do is fill out a worksheet form like
in the Pub, which the employee should do anyway. The intent
of sending these W-4's to IRS to deal with tax protesters,
not hassle people who take advantage of info in actual IRS
Pubs to match W/H to projected liability.

Fred F.

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"Gene E. Utterback, EA" <eagent[at]alliancetax.com> writes:

- quote -

That is incorrect. Pub 15 is clear on this.

An employer has up to 30 days to put into effect a new W4
submitted by an employee. That is true for *any* W4, not
only W4's with more than ten allowances. While some
employers might choose to delay implementing a W4 with more
than ten allowances for longer to give the IRS time to
complain if indeed they're going to complain, they are under
no obligation to do so.

- quote -

I don't see what this would "expose" that isn't already
exposed, considering that employers are already required to
file their employees' W4's with the IRS (once per quarter,
isn't it?).

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Gene E. Utterback, EA wrote:

- quote -

No. I'm sure that's not correct.

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Joe User wrote:

- quote -

For what it's worth -- there was only one number back then,
in 1990-1996, although I only increased my withholding above
to in 1993 (mortgage interest).

My question relates to whether I can legally adjust
my exemption allowances to correct for an error in
the employer's withholding calculations.

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cmkey[at]msn.com (cmkey) wrote:

- quote -

Nothing wrong with that, by either of you.
What's your point?

The subject of the initial posting in this thread
was about an employer who flatly refused to accept
"more than 10" W-4's. Some of us believe that is
simply wrong, according to law.

But obviously the employer is required (by law) to
send the "more than 10" W-4 to the IRS. There is
no harm in the employer's reiterating that point,
even though it is written on the official W-4 form.

And just as obviously, an employee might reasonably
change the W-4 to "10" simply to avoid having to
deal with the IRS, even if he/she can justify the
more than 10 allowances. It does not indicate that
he/she was exaggerating.

(That is especially true if the employer opts to
withhold based on 10 allowances anyway, as IRS Pub 15
apparently permits. Surprise!)

I know I would avoid the hassle, based on my bad
experience 20 years ago. Apparently the IRS handles
this better now, based on recent postings. But not
only was it a major for me headache 20 years ago --
which was never resolved satisfactorily and remained
a stigma for many years -- but due to a clerical error
during a change in the payroll system, the 20-year-old
indication of a letter of determination resurfaced and
mistakenly caused complications just a few months ago.

I am fortunate to have enough take-home income that
I would not care if I loan $3100*N[*] to the federal
government in excess withholding. But of course,
others are not so fortunate. That is why no employer
should flatly refuse "more than 10" W-4's. They
should simply do their due diligence by sending the
W-4 to the IRS, and let the chips fall where they may.
[*] $3100*N is $129 for N allowances over 10 for 24
semimonthly pay periods. Add the state's
withholding, for example $1008*N for Calif. On
second thought, even I am not that fortunate :-).

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I am a bookkeeper / payroll clerk of many years. I have
only ever received one W-4 for over 10 allowances. I simply
informed the employee that if he wanted more than 10 I had
to notify the IRS. He opted to redo it for 10. I know him,
and believe it was legitimate. I just gave him the option of
no questions being asked by the IRS and he took it.

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- quote -

Since we were not there when the OP turned in the W4 with
more than 10 exemptions, we don't know by what he indicated
in some way that this was not invalid. Who knows. It could
have been an off-the-cuff, unintentional comment on his part
that lead the payroll person to believe it was not accurate.

Carol
My mind not only wanders, sometimes it leaves completely.

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"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:

- quote -

Yes. More specifically, if the employer uses the "wage
bracket" method, Pub 15 states in sec 16 (p. 33 of the
2004 Pub 15): ``you may continue to withhold the amount
in the "10" column when your employee has more than 10
allowances''.

But that statement implicit pays homage to the fact that
the employer should (must?) not arbitrarily reject W-4's
that claim more than 10 allowances, because it says
"when your employee has more than 10".

More to the point, under the "wage bracket" description,
Pub 15 clearly states: "[m]ore than 10 allowances may
be claimed". The section goes on to explain a method
for using the "wage bracket" tables and accounting for
more than 10 allowances even though the tables stop at 10.
(But that method is voluntary.)

Moreover, the rule that permits the employer to withhold
at 10 even if more allowances are claimed applies only
to the "wage bracket" method. For the "percentage method",
the instructions are clear: simply multiply the number
of allowances by the appropriate amount in Table 5.

- quote -

For the Calif withholding tables, the withholding tables
are clearly labeled "10 or more". So the employer's
computer program should have used the number in that
column.

But in the Calif computation, those are only the "personal
allowances", namely those that correspond to exemptions
that can be claimed on Form 540 (typically yourself, spouse
and dependents).

Additional "allowances for estimated deductions" are
subtracted from the taxable income using Table 2 before
using the "wage bracket" tables. Table 2 only goes up to
10. But the footnote states: if the number of allowances
exceeds 10, "multiply the amount shown for one Additional
Allowance by the number claimed".

So it seems to me that the employer's computer program is
not following current law.

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"Joe User" wrote:

- quote -

While there's no penalty for overwithholding unilaterally by
the employer, IRS cannot enforceably direct people to do
anything; only federal courts can, and such happens when
people ignore an IRS administrative summons, for example.
Were an employee to complain to IRS, they may send an
informational letter and yellow-highlighted Pub 15 to them,
but if that fails, they're not going to walk a proposed show
cause motion over to the Asst. U.S. Attorney's office. But
if a major employer decided everybody is "S-1" as a
cost-cutting measure, IRS just may have to do that.

IRS uses "must" and "shall" in Regs, Rulings, and Pubs if
statute states or implies mandatory behavior, otherwise
"should" may be the best fit. Especially in publications,
though, they seem to choose the word, or leave silent,
according to what suits them. Just in Pub 15, you "should"
inspect a workers SS card, saying some law says they must
show it to you. But you "must" file certain things on
certain forms, though no statute specifically says that. Go
figure.

I think section 3402 is very clear in that the number of
allowances on the W-4 must be honored, even though the
wording is directed to the employee as how to compute
allowances to which he is "entitled." However, the IRS does
not require the worker to furnish the computational details
to the employer. But it all doesn't matter, since Congress
has provided IRS no tool to enforce the law -- commonly
penalties -- where there's overwithholding to which the
employee objects.

Fred F.

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"Jonathan Kamens" <jik[at]kamens.brookline.ma.us> wrote:
- quote -

I thought the rules required the employer to submit all W-4s
showing more than 10 exemptions to the IRS for review and
approval PRIOR to putting that W-4 into effect?

It hasn't come up in this thread, and it may not be a valid
argument for the employer, but from a practical standpoint I
suspect someone at the employer - perhaps their accountant -
has told them that if they want to actually use a W-4 with
more than 10 allowances they have to send it to the IRS for
approval - and the employer simply doesn't want to "expose"
his operation to the IRS.

Just a thought,
Gene E. Utterback, EA

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