All employers should have their employees complete Form W-4, Employee’s Withholding Allowance Certificate in order to know the correct amount of income tax to withhold from employees’ wages. New employees should be asked to submit a signed Form W-4 when they begin work, and the form should be effective starting with the first wage payment. Any employee exemptions need to be indicated on their form W-4 and kept on file. If a new employee does not submit a completed Form W-4, taxes withholding should be calculated as if he or she is single, with no withholding allowances. Non-resident aliens may require additional withholding. An employee’s form W-4 stays in effect until they issue you a new one. However, employees claiming exempt status must furnish a form W-4 each year.
In the past, employers were required to send a copy of their employee’s W-4 form to the IRS if an employee was claiming more that 10 dependents. Although this is no longer necessary, under certain circumstances the IRS may direct you to supply copies of Forms W-4 to ensure employees have sufficient withholding. If you are required to provide copies of employee W-4s, you will be notified by the IRS to do so via written notice.
As an employer, you are required retain W-4 records for at least four years after the due date of the employee’s personal income tax return (generally, April 15) for the year in which the payment was made.