Employees claiming exemption from income tax are required to complete a new Form W-4 every calendar year, and the February 15th deadline is fast approaching.
According to the IRS 2021 Publication 15, generally, an employee who had no income tax liability last year and expects none this year may claim exemption from federal income tax withholding. A Form W-4 claiming exemption from withholding is effective when it is given to the employer and only for that calendar year. To continue to be exempt from withholding, an employee must submit a new Form W-4.
Before February 15, 2021, HR or payroll should remind each employee who claimed exemption from income tax withholding last year to submit a new Form W-4. On February 16, Forms W-4 claiming exemption from withholding expire. If the employee has not filed a 2021 form, the district must begin withholding income taxes.
If the employee provides a new Form W-4 claiming exemption from withholding on February 16, 2021, or later, it may be applied to future wages. Any taxes withheld while the exempt status wasn’t in place may not be refunded.
Each December, HR should remind employees to submit a new Form W-4 if their filing status, other income, deductions, or credits have changed or will change for the next year. It is also a good practice to notify employees who filed an exemption from withholding that they must file a new Form W-4 in a timely manner for the upcoming year.
Form W-4 changes
In 2020, the IRS redesigned the Form W-4, also known as the Employee’s Withholding Certificate. Some key points employers should note, as identified by the IRS:
- Current employees are not required to complete a new form but must use the new form if they make any adjustments to their withholding.
- Employers can still compute withholding based on information from the most recently submitted Form W-4 if employees choose not to adjust their withholding using the revised form.
For more information, please refer to the following resources:
Tracy Morris is an HR and compensation consultant at TASB HR Services. Send Tracy an email firstname.lastname@example.org.
Stay up to date with all the latest HR news and trends by joining the HRX mailing list!