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New Year: New W-4 Exemption Required

With a New Year upon us, it’s time for employees to submit a new Form W-4!

Although most employees may continue with their existing Form W-4 on file, many other employees may have experienced a lifestyle change (or changes) during the 2022 calendar year that will impact their tax liability for the 2023 calendar year (and certainly for the 2024 calendar year to come). Marriage, children, divorce, and additional income or employment all affect tax liability. Therefore, the new year makes it a great time for employees to update their tax filing status to correctly reflect any new tax deductions, credits, or additional incomes for the new, 2023 tax year to come. And by making this change now, employees will be less likely caught off guard when filing for 2024.

However, employees who wish to continue to claim exemption from withholding must complete and submit a new Form W-4, as required by the Internal Revenue Service (IRS), to their employer. If uncompleted, then the employer is obligated to change their tax withholding to a default tax rate.

For employees to continue to claim exemption from withholding for the 2023 calendar year, the individual claiming exemption must provide their employer with a new Form W-4 in order to continue to claim their exemption from withholding by February 15. If the individual fails to provide a new Form W-4 to claim exemption from withholding by this date, then it is incumbent upon the employer to begin withholding the individual’s taxes as if the individual is single or married filing separately, with no other entries in Step 2, 3 and 4 of the Form W-4. For those employers who fail to make this adjustment following February 15, they may be held liable for employment tax penalties levied by the Internal Revenue Service or other government entities.

References: https://www.irs.gov/taxtopics/tc753#:~:text=Publication%2015%2DT.-,Exemption%20From%20Withholding,liability%20for%20the%20current%20year