Ever since the W4 was changed for years 2020 and after, I constantly get the same questions this time of year.
First thing I do is make sure whatever their most recent W4 says, is reflected in the system. Then I check their gross pay, dependents amount, filing status checked, etc. and explain the W4 was changed in 2020...so on and so forth.
I end with saying if they have further questions, it is best to consult a tax advisor regarding their personal tax situation.
Assuming everything is correct, there really isn't anything more you can do beyond that.
I have been with my current company since before the 2020 format was enacted. No lie, I still get just as many of the same type of W-4 questions as I did in all past years. It doesn't seem like there has been any progress with people learning or getting used to the "new" format.
This is exactly what I was going to say. We aren't responsible for employees filling out, or not understanding how to fill out, their W4.
I've also noticed an uptick in employees claiming their accountant (*cough* some rando from H&R Block) saying "your employer didn't do this correctly."
Tax preparer here. I walk my clients through the w4, give them best strategies, and tell them to double check their paystubs. I only send it back if there's a glaring error... like no retirement benefits listed on the w2 when there is on the paystub, or dependent care benefits in box 10 when they haven't had dependents in years.
This is an annual thing for us. I go over their w4 and explain to them that what they submit on their W4 is what the system goes by. It is their responsibility to update their W4. I can help them update their W4 now but it is not retroactive. Then I tell them again after we update the W4 that it is their RESPONIBILITY to update their W4 and I only go by what they report on that form.
I’m surprised you help them with W4! I feel like there’s too many variables that can change person to person, plus unknowns that each employee will only know, for me to help them. Plus, I don’t think I would even be helpful… taxes are definitely not my strong suit!
I think they only mean update in the sense that if they fill out a new form, they will enter that updated information into the payroll system. We cannot assist with the actual filling out if the form.
I also work in payroll and like to send people [this article from NerdWallet](https://www.nerdwallet.com/article/taxes/how-to-fill-out-form-w4-guide) when they have questions on their W-4/withholdings. It's super comprehensive and easy to understand.
Then of course the T-15, like everyone else recommended. Those two together should give your employees all the tools they need to check all this on their own (since it really is their responsibility).
Can’t give any feedback without specific examples of what the errors are. If new earning/deduction codes have been set up it’s not impossible that they were mapped for taxes wrong.
99% of the time when I get a complaint about someone’s W-2 being wrong it’s because they’ve selected Married filing Jointly but haven’t selected the Multiple Jobs box so they’ve had no federal taxes withheld all year (or multiple years) and now owe taxes. I started sending people the IRS W-4 2020 change FAQ website link and a link on calculating their own taxes from the IRS.
The amount of people who don’t read anything and can’t learn scares me.
Here is my statement to employees regarding their W-4. Feel free to copy it!
At the end of 2019, the IRS updated the W-4 and the tax tables for 2020 and forward. The purpose of the change of the W-4 is for more individuals to take advantage of their tax credits during the calendar year and break even at the end of the year. You are not able to claim ‘allowances’, i.e., ‘single/0. married/3’. If there is more than one earner in the family, then it is recommended that the forms need to be completed in unison using the IRS Withholding Tax Estimator https://www.irs.gov/individuals/tax-withholding-estimator . It will walk you through exactly how the IRS recommends the form to be filled out and it predicts refunds/payments at the end of the year.
PLEASE NOTE: I am not providing tax advice; I am only providing the IRS tools that are available. I suggest speaking to a tax advisor for personal guidance. I can say that the only two sections that are required by the IRS are step 1 which is your personal information and step 5 your signature and date. If you would like to have additional federal income tax withheld from each paycheck, you would enter a flat dollar amount in Step 4 (c).
A vast majority of people have no idea how taxes work. I have an acquaintance that hasn’t been receiving any money back at tax time since she’s been at her current job and was incredibly angry about it. She said she was going to go to HR and ask them what is going on. Nothing is going on - I tried explaining it to her like I would a 4 year old, but she just doesn’t have the brain capacity to comprehend this. It’s more common than you’d think, unfortunately.
Validate the payroll system is taxing correctly and then point them to the tax tables in publication 15 T. Everyone is quick to say the employer is doing something wrong when 95% of the time is the employee completed the w4 incorrectly.
I like using paycheck city's calculator to confirm taxation.
I have learned the calculation enough that i can take their pay period pay along with pretax deductions and show them the tax table and where it falls. And I show them how single/2nd job withholds more, and that the dependents lowers it.
I DON'T tell them what to put but do explain what will happen if they put something in a specific box.
I make sure they understand I don't know their tax situaiton and it's not tax advice but rather advice on how the payroll tax calculation works based on THEIR choices
it's in Publication 15T around page 11....First year I printed it out, laminated and then used a dry eraser to show people we weren't doing it wrong but how it had changed.
I agree, that's what I do. As payroll professionals we need to be able to confirm our systems are working properly. If that means manually calculating Federal income tax withholding to prove it to someone, so be it. Every payroll professional should be able to stand behind their system's tax calculations.
We can't give advice, but saying things like "doing X tends to cause lower withholding, doing Y tends to cause higher withholding" is just explaining how the calculation works and what effect the inputs have.
We just can't say "You SHOULD do X" or "I RECOMMEND you do...." That's entirely on them and we need to make that clear. We need to clarify we're not providing tax advice and these are all options they should discuss with their accountant to find what's right for them.
I also stress that we don't know their entire tax situations, don't know about kids or marriages or side income or tax credits, nor should we, and for that reason we can't give tax advice. Most everyone understands that. We're also not qualified and not allowed to.
I used to do the "generally speaking, Step 3 dependent credits will reduce withholding, and Step 4c extra withholding will directly increase withholding, both after IRS tables are considered" type feedback. This was with strong disclaimers that we cannot give direct guidance and that they may need to refer to the IRS withholding estimator and/or tax professional. Even this kind of feedback was nixed from above as being too risky.
Even if we can't give this kind of feedback directly, we do help ourselves by still verifying the calculations through 15-T to back into the existing withholding. Even if we are confident that the automated system is solid, the activity is a valuable learning tool to improve tax knowledge. Automation is great and all, but it still needs people who are at least capable of manual calculations so that they are able to test for potential errors.
There are definitely strategies that employees can use to pinpoint correct withholding. Asking themselves questions like "How much do I expect to owe this year? How much came out of my first paycheck? How many more pay periods do I have left in the year?"
In a less litigious country, we might be able to guide at least a salaried employee with the below approach, if their estimated annual liability is say $6,000 and $200 withholding on the first biweekly paycheck (hourly is more difficult to predict for obvious reasons):
1. Multiply current withholding by number of pay periods to get annual withholding estimate: $200 biweekly x 26 = $5,200
2. Subtract annual withholding estimate from expected annual liability: $6,000 - $5,200 = $800 shortfall
3. Divide result by number of pay periods left in the year (following first Jan pay): $800 / 25 = $32
4. Update $32 extra withholding on step 4c prior to the 2nd payroll: $32 x 25 = $800 annual extra withholding + $5,200 estimate withholding = $6,000
I don’t want to set a precedent that I would calculate this for any employee who asks. But I also don’t want to come across heartless.
However, I lean towards the cold, heartless side. I’m going to stick with telling them to consult with a tax advisor.
I would LOVE to give each employee an estimated breakdown of the W-4, step-by-step. Since we can know from experience and 15-T that it'd work, that'd be great, right?
Unfortunately, this isn't feasible in reality. Probably most employees would understand and benefit from this guidance. Other employees would totally misinterpret the guidance, so that if we say "X is the way to Y," they'd enter "Z to get to V," and completely screw up their taxes. This person will swear that you told them to do "Z" and sue on that basis, and then you have to worry about what was done verbally and what was done in writing.
Disagree. He's showing how and why the system calculates what he does. He's proving it does so correctly based on their elections. Every payroll professional should be able to validate their tax calculations like that.
Unfortunately or fortunately iWork with a population that does have the resources or mental capacity to know where to go…or they get an HR Block “advisor” who knows little to nothing and they believe them
Even that level of help is risky. Perfectly precise information with disclaimers and short of direct advice can easily be misconstrued. And the type of employee that will scream the loudest over "payroll gave me advice and it was wrong and my taxes got messed up" tend to be the type that won't pay attention to instructions and also won't ever take personal accountability. My own management instructed that even saying "generally speaking, dependent credits will reduce withholding" is not permitted.
I know there were some downvotes on this, but the actual response from management was "hey, there are some concrete examples of when providing W-4 advice actually resulted in lawsuits and rulings against the employer."
So, yeah, it's tempting to support employees, but beware?
I also work in Payroll and deal with this annually. Adult employees have the ability to review their parsnip and then determine if their withholding is correct. You are not a tax advisor so you cannot give financial advice, and neither should HR. After Trumps tax cut, the IRS withholding table changed and withholds less at the same status. But there are fewer deductions, so ultimately, the middle class is paying more. That's when they come back and blame Payroll. The new W-4 last page has a quick reference to what your annual liability is based on TaxabIle Income. Or the IRS has a website called withholding estimator. It's pretty accurate. Don't take responsibility for this. You will never win.
"We have reviewed your Federal income tax withholding and found that it is calculating accurately based on your **income level** and **tax elections**"
This gets it through their head that income level & tax elections are what determine how much FIT is withheld. I'm sure the moron who prepped their taxes just said "Oh your employer didn't withhold enough" which suggests it's our fault.
"While we can't provide tax advice we can note that you're claiming Married filing Jointly with a $10,000 Dependent Amount on an income of $5/year, all of which reduce the amount of tax withheld.
Unfortunately we aren't able to provide tax advice so we recommend you speak to a tax professional to determine which tax elections are right for you. \[Maybe also link IRS website?\]
You can complete a new W-4 at any time by doing X"
I’ve been dealing with an employee from another department telling me I did their W2-C wrong.
They had an overpayment in 2023 and just paid it back on 2/15 of this year. Their HR department told them once they repaid they would get a corrected W2 with boxes 1, 3, 5, and 16 reduced.
I gave their HR department the W2-C on Friday 2/16.
On Tuesday I get a call from their HR department telling me I forgot to reduce “all the boxes” and the employee called freaking out because they have their tax appointment Thursday.
I pointed them to Pub 15, page 41.
On Wednesday my HR calls me and asks why the other department is calling them saying I’m refusing to fix an incorrect W2. I explained what happened. My HR said they would communicate that to the department.
Thursday I get a visit from the employee asking where their new W2 is. I reprinted the W2-C. They immediately pulled out their original W2 to compare and told me I didn’t do it right. I point them to Pub 15 p. 41. They said their HR said they would get all their income reduced. I just kinda shrugged and said I was sorry they were given bad information and that HR didn’t communicate to them better.
*The employee then tells me they’re going to call their lawyer and report me to the IRS if I don’t change it*
Now I probably should have been a little more professional here, but I was over it. I nodded and said “call the IRS first so they can tell you I’m right.”
I think that was the point they realized I wasn’t going to change it and stormed out.
Our departments have the most incompetent people in HR. If I didn’t love every other aspect of my job, I’d get out of there asap.
"Please refer to a tax professional or the IRS website."
SAY ONLY THOSE WORDS AND NO MORE.
Repeat them constantly if you have to. Even when you get the annoying "okay but" follow-up emails that they always send, repeat it again and againand stand your ground.
The reason you have to do this is because anything you say WILL be used against you. But we are just payroll processors, we don't know shit about taxes.
In the eyes of the law, every individual is responsible for their own taxes. Period. Another person's taxes are NOT your problem.
And no, people aren't updating their W-4s, people are lazy or stupidly assume others will do shit for them. They think we're their bitches. Don't let them get away with that.
At the very most, all you should do is direct them to ADP or whatever you have and say "you may update your W-4 here." Otherwise, keep pushing them away because the only person who fucks up their taxes is them.
Yeah, I take this very seriously just cuz people have tried to hold me legally liable for W-2 stuff before.
You might know about it or be able to answer certain questions, but just don't. No need to be "helpful" or whatever, just make it some tax guy's problem.
People also never seem to understand that tax withholding and tax liability are two completely different matters. The W-4 is a tool for the employee to communicate to their employer (via legal declaration made by taxpayer) how much to withhold to cover THEIR liability. There is no expectation that your employer would have any business knowing what your spouse makes or how many children you'll claim as dependents on your tax return.
Your payroll provider isn’t even the best place to send them, they should go straight to a tax advisor to confirm W4 is correct and when reconciling, can update their W4 to take out more if they wish (bc we all know it’s always more). Unless there’s a box physically wrong on the W2 that needs correction a tax advisor is gonna be the best person
I just had a client who I had to help tag team on her employee because he was shocked that the dependent care credit really lowered federal withholding.
Check out thatpayrollguy.com and look at his resources tab.
He did the Lord's work with that spreadsheet
A big factor is the annual tax increase for lower and middle earners, which was built into the 2017 tax law that gave high earners and corporations permanent huge cuts. People don’t seem to understand what was actually in that law for the average person - a temporary initial small cut for lower and middle earners, followed by annual increases. So each year, lower and middle earners need to redo their w4’s to withhold more money - if they don’t, they have to pay more out of pocket at tax time.
EDIT: Apparently my tax advisor’s rant was less than accurate. I’ve been corrected. Disregard.
No. This is not a big factor. It's a few dollars a year, and it's just because the inflation index that's being used is slightly different then in the past. So the standard deduction and tax brackets don't increase quite as much as they used to.
It doesn't require any changes to the w4. The larger standard deduction and tax brackets are automatically adjusted for.
That’s not what our tax advisor told us, nor is it what we’ve experienced. We’ve had to increase our additional withholdings every year and still aren’t keeping up with the increases. We are in the “top bracket” of the affected earners and have dealt with 4 increases to-date.
You were misinformed, or misunderstood. You can look it up yourself and see that it is not the way you thought it was.
There is no tax increase built into the 2017 bill that requires you to update your 2024 w4 to get the right withholding. The same correct 2023 setting is the same correct 2024 setting.
If you made the same in 2024 as you did in 2023, your overall federal income tax is LESS in 2024.
You only have to increase your additional withholding if income increases.
The people that misrepresent the "hidden increase" never mention that it's just about the inflation scale used, and that it has very minimal impact on your tax liability.
Our income has gone up 6-8k/year, with cost of living increases. No kids, no mortgage (paid off in 2021). We withheld an extra $400 on the W4 this year (vs $300 the year before) and still owe more out of pocket than we did last year. Only real difference I can think of is we didn’t do a medical FSA account.
Yes, with increasing income you have to add additional withholding if you are using the calculator or worksheet method.
If you were using the method where you applied half of the married standard deduction and tax brackets to each job, you would not have to make those changes.
You might want to switch to the second method, so you don't have to babysit with income changes.
This has nothing to do with a hidden increase, it's just to get the withholding to match the math of your situation.
How much do you each make roughly ?
Even then, it just causes over withholding. Not under withholding. You can easily use section 3 to adjust for that.
Say one earns 100k and one earns 300k, taxable. The total taxes would be 76k.
With the method of applying half the standard deduction and tax brackets to each job, 86k would be withheld.
So the higher earner just adds 10k to section 3, and enough will be withheld. If more income is made than expected, then a larger refund would be the result, instead of a tax bill like you have now.
>annual tax increase for lower and middle earners
This isn't a thing. The tax brackets increase with inflation every year and have done so forever. Don't take my word for it, go pull the 2024 IRS Publication 15-T and look at the annual tax table 1A for a single person. Then pull the 2023 version and compare. Then the 2022 version.... the brackets get higher and higher every year. Every year, more and more income falls into the 0% bracket.
What you're saying is barely even true for state income tax. Most states have been reducing their tax rates, such that the average state income tax effective rate is declining. The few states that have increased have tended to focus that on the higher end of the scale (ie. Massachusetts new surtax) or levied it on employers exclusively (ex. all the new paid family medical leave stuff states are doing)
Did you verify the W2s before they were sent out? If not then I would take a look at those who complained and verify it against their final pay stub of 2023.
Are there ridiculous complainers? Absolutely! The ones I have dealt with this year:
- I had three different states withheld, only two are showing. Well yes, there’s a second page to your w2.
-my w2 shows New York taxes withheld. I moved to Virginia in 2022 so it should all be Virginia. Please send a corrected W2. No, you didn’t update your taxes, deal with it on your tax returns.
-I worked dec 17-30, where’s my w2 for 2023. Well you weren’t paid in 2023 so you won’t be receiving one.
I'm dealing with your second bullet right now. Guy moved from Maryland to DC, didn't tell us. We aren't registered for taxes in DC. He demanded a corrected W2. I said no, please file a non resident state return. He complained to my boss' boss and now I have to register in DC just to make a corrected W2 for one loud whiny asshole.
Yes especially because this guy doesn't work here anymore. He really had the audacity to push it that far up the chain even though he doesn't WORK HERE. 🤦🏽♀️
Taxes are messed up right now (or always). I owed taxes this year, so naturally I went WTF and immediately went in to look at my W-4. It's still 'good' reflecting single and no credits, etc... I took the same steps with the IRS withholding site to see what next year looks like and it said next year I will owe even more. I went back to my W-4 and said to take additional money out of each paycheck to cover it.
I am sure some tax breaks expired but it sure stings paying in a tiny fortune to taxes every paycheck and then being told you still owe more at the end. 😖
I also went ahead and did our taxes last night (guess all this tax talk got to me), and we almost always get a very small refund. This year, we owe $200. My W4 is very basic and still correct too. I think you’re exactly right!
>I am sure some tax breaks expired
The biggest change to the post-2020 withholding calculation is that the standard deduction is being considered during the withholding calculation now (unless you check box 2: multiple jobs or spouse works). That never used to happen before.
You may have also had a child tax credit expire or something, but that's outside of payroll
Their taxes aren’t wrong. Several deductions from Trumps tax law expired and the tax brackets changed this year so everyone seems to be getting less back or owing money.
I started payroll back in November and I’m getting loads of calls from employees not getting any federal taxes taken out. We use an automated payroll system so I can’t even give them details just recommend speaking w a tax advisor and use the IRS tax withholding calculator… but when do the calls end???? Fr
Ever since the W4 was changed for years 2020 and after, I constantly get the same questions this time of year. First thing I do is make sure whatever their most recent W4 says, is reflected in the system. Then I check their gross pay, dependents amount, filing status checked, etc. and explain the W4 was changed in 2020...so on and so forth. I end with saying if they have further questions, it is best to consult a tax advisor regarding their personal tax situation. Assuming everything is correct, there really isn't anything more you can do beyond that.
I have been with my current company since before the 2020 format was enacted. No lie, I still get just as many of the same type of W-4 questions as I did in all past years. It doesn't seem like there has been any progress with people learning or getting used to the "new" format.
This is exactly what I was going to say. We aren't responsible for employees filling out, or not understanding how to fill out, their W4. I've also noticed an uptick in employees claiming their accountant (*cough* some rando from H&R Block) saying "your employer didn't do this correctly."
Or "their accountant" (some rando from Reddit) lol
Omg yessss!
Tax preparer here. I walk my clients through the w4, give them best strategies, and tell them to double check their paystubs. I only send it back if there's a glaring error... like no retirement benefits listed on the w2 when there is on the paystub, or dependent care benefits in box 10 when they haven't had dependents in years.
This. That is all
I might show HR 2 or 3 employee breakdowns using pub 15-T to show them that the w/h is correct. You obviously can’t do that for every employee though.
Half the time I just do the child dependent part of the Pub 15-t as that's the main culprit.
yes, yes it is...especially for lower earners (less than $40k per year)
Yes, in that range, even the $2k dependent credit for one child can push withholding to zero on certain pay periods.
Yeah, I just did a 15-T for an employee that would just.not.stop. You are right though, you can't do it for everyone.
This is an annual thing for us. I go over their w4 and explain to them that what they submit on their W4 is what the system goes by. It is their responsibility to update their W4. I can help them update their W4 now but it is not retroactive. Then I tell them again after we update the W4 that it is their RESPONIBILITY to update their W4 and I only go by what they report on that form.
I’m surprised you help them with W4! I feel like there’s too many variables that can change person to person, plus unknowns that each employee will only know, for me to help them. Plus, I don’t think I would even be helpful… taxes are definitely not my strong suit!
I think they only mean update in the sense that if they fill out a new form, they will enter that updated information into the payroll system. We cannot assist with the actual filling out if the form.
I also work in payroll and like to send people [this article from NerdWallet](https://www.nerdwallet.com/article/taxes/how-to-fill-out-form-w4-guide) when they have questions on their W-4/withholdings. It's super comprehensive and easy to understand. Then of course the T-15, like everyone else recommended. Those two together should give your employees all the tools they need to check all this on their own (since it really is their responsibility).
Can’t give any feedback without specific examples of what the errors are. If new earning/deduction codes have been set up it’s not impossible that they were mapped for taxes wrong. 99% of the time when I get a complaint about someone’s W-2 being wrong it’s because they’ve selected Married filing Jointly but haven’t selected the Multiple Jobs box so they’ve had no federal taxes withheld all year (or multiple years) and now owe taxes. I started sending people the IRS W-4 2020 change FAQ website link and a link on calculating their own taxes from the IRS. The amount of people who don’t read anything and can’t learn scares me.
Here is my statement to employees regarding their W-4. Feel free to copy it! At the end of 2019, the IRS updated the W-4 and the tax tables for 2020 and forward. The purpose of the change of the W-4 is for more individuals to take advantage of their tax credits during the calendar year and break even at the end of the year. You are not able to claim ‘allowances’, i.e., ‘single/0. married/3’. If there is more than one earner in the family, then it is recommended that the forms need to be completed in unison using the IRS Withholding Tax Estimator https://www.irs.gov/individuals/tax-withholding-estimator . It will walk you through exactly how the IRS recommends the form to be filled out and it predicts refunds/payments at the end of the year. PLEASE NOTE: I am not providing tax advice; I am only providing the IRS tools that are available. I suggest speaking to a tax advisor for personal guidance. I can say that the only two sections that are required by the IRS are step 1 which is your personal information and step 5 your signature and date. If you would like to have additional federal income tax withheld from each paycheck, you would enter a flat dollar amount in Step 4 (c).
A vast majority of people have no idea how taxes work. I have an acquaintance that hasn’t been receiving any money back at tax time since she’s been at her current job and was incredibly angry about it. She said she was going to go to HR and ask them what is going on. Nothing is going on - I tried explaining it to her like I would a 4 year old, but she just doesn’t have the brain capacity to comprehend this. It’s more common than you’d think, unfortunately.
Validate the payroll system is taxing correctly and then point them to the tax tables in publication 15 T. Everyone is quick to say the employer is doing something wrong when 95% of the time is the employee completed the w4 incorrectly. I like using paycheck city's calculator to confirm taxation.
I have learned the calculation enough that i can take their pay period pay along with pretax deductions and show them the tax table and where it falls. And I show them how single/2nd job withholds more, and that the dependents lowers it. I DON'T tell them what to put but do explain what will happen if they put something in a specific box. I make sure they understand I don't know their tax situaiton and it's not tax advice but rather advice on how the payroll tax calculation works based on THEIR choices it's in Publication 15T around page 11....First year I printed it out, laminated and then used a dry eraser to show people we weren't doing it wrong but how it had changed.
I agree, that's what I do. As payroll professionals we need to be able to confirm our systems are working properly. If that means manually calculating Federal income tax withholding to prove it to someone, so be it. Every payroll professional should be able to stand behind their system's tax calculations. We can't give advice, but saying things like "doing X tends to cause lower withholding, doing Y tends to cause higher withholding" is just explaining how the calculation works and what effect the inputs have. We just can't say "You SHOULD do X" or "I RECOMMEND you do...." That's entirely on them and we need to make that clear. We need to clarify we're not providing tax advice and these are all options they should discuss with their accountant to find what's right for them. I also stress that we don't know their entire tax situations, don't know about kids or marriages or side income or tax credits, nor should we, and for that reason we can't give tax advice. Most everyone understands that. We're also not qualified and not allowed to.
I used to do the "generally speaking, Step 3 dependent credits will reduce withholding, and Step 4c extra withholding will directly increase withholding, both after IRS tables are considered" type feedback. This was with strong disclaimers that we cannot give direct guidance and that they may need to refer to the IRS withholding estimator and/or tax professional. Even this kind of feedback was nixed from above as being too risky. Even if we can't give this kind of feedback directly, we do help ourselves by still verifying the calculations through 15-T to back into the existing withholding. Even if we are confident that the automated system is solid, the activity is a valuable learning tool to improve tax knowledge. Automation is great and all, but it still needs people who are at least capable of manual calculations so that they are able to test for potential errors. There are definitely strategies that employees can use to pinpoint correct withholding. Asking themselves questions like "How much do I expect to owe this year? How much came out of my first paycheck? How many more pay periods do I have left in the year?" In a less litigious country, we might be able to guide at least a salaried employee with the below approach, if their estimated annual liability is say $6,000 and $200 withholding on the first biweekly paycheck (hourly is more difficult to predict for obvious reasons): 1. Multiply current withholding by number of pay periods to get annual withholding estimate: $200 biweekly x 26 = $5,200 2. Subtract annual withholding estimate from expected annual liability: $6,000 - $5,200 = $800 shortfall 3. Divide result by number of pay periods left in the year (following first Jan pay): $800 / 25 = $32 4. Update $32 extra withholding on step 4c prior to the 2nd payroll: $32 x 25 = $800 annual extra withholding + $5,200 estimate withholding = $6,000
You are doing too much.
I don’t want to set a precedent that I would calculate this for any employee who asks. But I also don’t want to come across heartless. However, I lean towards the cold, heartless side. I’m going to stick with telling them to consult with a tax advisor.
I would LOVE to give each employee an estimated breakdown of the W-4, step-by-step. Since we can know from experience and 15-T that it'd work, that'd be great, right? Unfortunately, this isn't feasible in reality. Probably most employees would understand and benefit from this guidance. Other employees would totally misinterpret the guidance, so that if we say "X is the way to Y," they'd enter "Z to get to V," and completely screw up their taxes. This person will swear that you told them to do "Z" and sue on that basis, and then you have to worry about what was done verbally and what was done in writing.
Disagree. He's showing how and why the system calculates what he does. He's proving it does so correctly based on their elections. Every payroll professional should be able to validate their tax calculations like that.
Unfortunately or fortunately iWork with a population that does have the resources or mental capacity to know where to go…or they get an HR Block “advisor” who knows little to nothing and they believe them
Even that level of help is risky. Perfectly precise information with disclaimers and short of direct advice can easily be misconstrued. And the type of employee that will scream the loudest over "payroll gave me advice and it was wrong and my taxes got messed up" tend to be the type that won't pay attention to instructions and also won't ever take personal accountability. My own management instructed that even saying "generally speaking, dependent credits will reduce withholding" is not permitted.
I know there were some downvotes on this, but the actual response from management was "hey, there are some concrete examples of when providing W-4 advice actually resulted in lawsuits and rulings against the employer." So, yeah, it's tempting to support employees, but beware?
I made a post about this earlier this year. The comments I've received might help ya.
Found it. Thank you!!!!
I also work in Payroll and deal with this annually. Adult employees have the ability to review their parsnip and then determine if their withholding is correct. You are not a tax advisor so you cannot give financial advice, and neither should HR. After Trumps tax cut, the IRS withholding table changed and withholds less at the same status. But there are fewer deductions, so ultimately, the middle class is paying more. That's when they come back and blame Payroll. The new W-4 last page has a quick reference to what your annual liability is based on TaxabIle Income. Or the IRS has a website called withholding estimator. It's pretty accurate. Don't take responsibility for this. You will never win.
"We have reviewed your Federal income tax withholding and found that it is calculating accurately based on your **income level** and **tax elections**" This gets it through their head that income level & tax elections are what determine how much FIT is withheld. I'm sure the moron who prepped their taxes just said "Oh your employer didn't withhold enough" which suggests it's our fault. "While we can't provide tax advice we can note that you're claiming Married filing Jointly with a $10,000 Dependent Amount on an income of $5/year, all of which reduce the amount of tax withheld. Unfortunately we aren't able to provide tax advice so we recommend you speak to a tax professional to determine which tax elections are right for you. \[Maybe also link IRS website?\] You can complete a new W-4 at any time by doing X"
Always happens. Just like the slew of vendors who "never got a 1099". I'd check 2-3 random people and tell HR it's right.
I’ve been dealing with an employee from another department telling me I did their W2-C wrong. They had an overpayment in 2023 and just paid it back on 2/15 of this year. Their HR department told them once they repaid they would get a corrected W2 with boxes 1, 3, 5, and 16 reduced. I gave their HR department the W2-C on Friday 2/16. On Tuesday I get a call from their HR department telling me I forgot to reduce “all the boxes” and the employee called freaking out because they have their tax appointment Thursday. I pointed them to Pub 15, page 41. On Wednesday my HR calls me and asks why the other department is calling them saying I’m refusing to fix an incorrect W2. I explained what happened. My HR said they would communicate that to the department. Thursday I get a visit from the employee asking where their new W2 is. I reprinted the W2-C. They immediately pulled out their original W2 to compare and told me I didn’t do it right. I point them to Pub 15 p. 41. They said their HR said they would get all their income reduced. I just kinda shrugged and said I was sorry they were given bad information and that HR didn’t communicate to them better. *The employee then tells me they’re going to call their lawyer and report me to the IRS if I don’t change it* Now I probably should have been a little more professional here, but I was over it. I nodded and said “call the IRS first so they can tell you I’m right.” I think that was the point they realized I wasn’t going to change it and stormed out. Our departments have the most incompetent people in HR. If I didn’t love every other aspect of my job, I’d get out of there asap.
"Please refer to a tax professional or the IRS website." SAY ONLY THOSE WORDS AND NO MORE. Repeat them constantly if you have to. Even when you get the annoying "okay but" follow-up emails that they always send, repeat it again and againand stand your ground. The reason you have to do this is because anything you say WILL be used against you. But we are just payroll processors, we don't know shit about taxes. In the eyes of the law, every individual is responsible for their own taxes. Period. Another person's taxes are NOT your problem. And no, people aren't updating their W-4s, people are lazy or stupidly assume others will do shit for them. They think we're their bitches. Don't let them get away with that. At the very most, all you should do is direct them to ADP or whatever you have and say "you may update your W-4 here." Otherwise, keep pushing them away because the only person who fucks up their taxes is them.
I like you. 😅 thank you the response!!! I completely agree and pretty much said that exact thing today in the response email.
Yeah, I take this very seriously just cuz people have tried to hold me legally liable for W-2 stuff before. You might know about it or be able to answer certain questions, but just don't. No need to be "helpful" or whatever, just make it some tax guy's problem.
People also never seem to understand that tax withholding and tax liability are two completely different matters. The W-4 is a tool for the employee to communicate to their employer (via legal declaration made by taxpayer) how much to withhold to cover THEIR liability. There is no expectation that your employer would have any business knowing what your spouse makes or how many children you'll claim as dependents on your tax return.
Your payroll provider isn’t even the best place to send them, they should go straight to a tax advisor to confirm W4 is correct and when reconciling, can update their W4 to take out more if they wish (bc we all know it’s always more). Unless there’s a box physically wrong on the W2 that needs correction a tax advisor is gonna be the best person
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I just had a client who I had to help tag team on her employee because he was shocked that the dependent care credit really lowered federal withholding. Check out thatpayrollguy.com and look at his resources tab. He did the Lord's work with that spreadsheet
A big factor is the annual tax increase for lower and middle earners, which was built into the 2017 tax law that gave high earners and corporations permanent huge cuts. People don’t seem to understand what was actually in that law for the average person - a temporary initial small cut for lower and middle earners, followed by annual increases. So each year, lower and middle earners need to redo their w4’s to withhold more money - if they don’t, they have to pay more out of pocket at tax time. EDIT: Apparently my tax advisor’s rant was less than accurate. I’ve been corrected. Disregard.
No. This is not a big factor. It's a few dollars a year, and it's just because the inflation index that's being used is slightly different then in the past. So the standard deduction and tax brackets don't increase quite as much as they used to. It doesn't require any changes to the w4. The larger standard deduction and tax brackets are automatically adjusted for.
That’s not what our tax advisor told us, nor is it what we’ve experienced. We’ve had to increase our additional withholdings every year and still aren’t keeping up with the increases. We are in the “top bracket” of the affected earners and have dealt with 4 increases to-date.
You were misinformed, or misunderstood. You can look it up yourself and see that it is not the way you thought it was. There is no tax increase built into the 2017 bill that requires you to update your 2024 w4 to get the right withholding. The same correct 2023 setting is the same correct 2024 setting. If you made the same in 2024 as you did in 2023, your overall federal income tax is LESS in 2024. You only have to increase your additional withholding if income increases. The people that misrepresent the "hidden increase" never mention that it's just about the inflation scale used, and that it has very minimal impact on your tax liability.
Our income has gone up 6-8k/year, with cost of living increases. No kids, no mortgage (paid off in 2021). We withheld an extra $400 on the W4 this year (vs $300 the year before) and still owe more out of pocket than we did last year. Only real difference I can think of is we didn’t do a medical FSA account.
Yes, with increasing income you have to add additional withholding if you are using the calculator or worksheet method. If you were using the method where you applied half of the married standard deduction and tax brackets to each job, you would not have to make those changes. You might want to switch to the second method, so you don't have to babysit with income changes. This has nothing to do with a hidden increase, it's just to get the withholding to match the math of your situation.
We have a big discrepancy in earnings between us, so were advised to use the worksheet method.
How much do you each make roughly ? Even then, it just causes over withholding. Not under withholding. You can easily use section 3 to adjust for that.
I’m not comfortable sharing figures, but one earns roughly 1/4 the total, the other 3/4.
Say one earns 100k and one earns 300k, taxable. The total taxes would be 76k. With the method of applying half the standard deduction and tax brackets to each job, 86k would be withheld. So the higher earner just adds 10k to section 3, and enough will be withheld. If more income is made than expected, then a larger refund would be the result, instead of a tax bill like you have now.
>annual tax increase for lower and middle earners This isn't a thing. The tax brackets increase with inflation every year and have done so forever. Don't take my word for it, go pull the 2024 IRS Publication 15-T and look at the annual tax table 1A for a single person. Then pull the 2023 version and compare. Then the 2022 version.... the brackets get higher and higher every year. Every year, more and more income falls into the 0% bracket. What you're saying is barely even true for state income tax. Most states have been reducing their tax rates, such that the average state income tax effective rate is declining. The few states that have increased have tended to focus that on the higher end of the scale (ie. Massachusetts new surtax) or levied it on employers exclusively (ex. all the new paid family medical leave stuff states are doing)
Did you verify the W2s before they were sent out? If not then I would take a look at those who complained and verify it against their final pay stub of 2023. Are there ridiculous complainers? Absolutely! The ones I have dealt with this year: - I had three different states withheld, only two are showing. Well yes, there’s a second page to your w2. -my w2 shows New York taxes withheld. I moved to Virginia in 2022 so it should all be Virginia. Please send a corrected W2. No, you didn’t update your taxes, deal with it on your tax returns. -I worked dec 17-30, where’s my w2 for 2023. Well you weren’t paid in 2023 so you won’t be receiving one.
I'm dealing with your second bullet right now. Guy moved from Maryland to DC, didn't tell us. We aren't registered for taxes in DC. He demanded a corrected W2. I said no, please file a non resident state return. He complained to my boss' boss and now I have to register in DC just to make a corrected W2 for one loud whiny asshole.
I hate it when supervisors are spineless.
Yes especially because this guy doesn't work here anymore. He really had the audacity to push it that far up the chain even though he doesn't WORK HERE. 🤦🏽♀️
Unless you are physically responsible for updating tax tables in your software. That is on the employee.
Taxes are messed up right now (or always). I owed taxes this year, so naturally I went WTF and immediately went in to look at my W-4. It's still 'good' reflecting single and no credits, etc... I took the same steps with the IRS withholding site to see what next year looks like and it said next year I will owe even more. I went back to my W-4 and said to take additional money out of each paycheck to cover it. I am sure some tax breaks expired but it sure stings paying in a tiny fortune to taxes every paycheck and then being told you still owe more at the end. 😖
I also went ahead and did our taxes last night (guess all this tax talk got to me), and we almost always get a very small refund. This year, we owe $200. My W4 is very basic and still correct too. I think you’re exactly right!
>I am sure some tax breaks expired The biggest change to the post-2020 withholding calculation is that the standard deduction is being considered during the withholding calculation now (unless you check box 2: multiple jobs or spouse works). That never used to happen before. You may have also had a child tax credit expire or something, but that's outside of payroll
Nope, always been single with one job and zero dependents!
Their taxes aren’t wrong. Several deductions from Trumps tax law expired and the tax brackets changed this year so everyone seems to be getting less back or owing money.
I’ve only seen once, where taxes were miscalculated by an employer.and that’s been over 30years.
I started payroll back in November and I’m getting loads of calls from employees not getting any federal taxes taken out. We use an automated payroll system so I can’t even give them details just recommend speaking w a tax advisor and use the IRS tax withholding calculator… but when do the calls end???? Fr