Fourth Quarter: A Good Time for Employers to Do This

There is one thing that you must always get right for employees. Truthfully, I could create a whole list of things that you might do to increase job satisfaction, but this one thing is critical - payroll. You always want to get payroll right. Unfortunately, your clients may overlook this one piece that is related to payroll and unintentionally hurt their employees.

The ability to review and modify payroll withholding allows employees to adjust withholding to better suit their financial situations. Share this information with your clients so they can better support their teams. 

The W-4 Employee's Withholding Certificate

As you probably know, the IRS updated form W-4 in 2020 so it is now a full-page form that no longer includes withholding allowances. Employers are required to use the new W-4 with new hires but are not required to have existing employees complete the new version of the form. However, there are advantages to providing the new form to existing employees and then creating an action item to continue offering the opportunity to review withholding annually. 

Why should you distribute a new W-4 to current employees?

The longer form actually reduces the complexity that employees used to navigate in the old form. Now, it is easier for employees to have a clearer understanding of their withholding situations and this understanding allows them to better plan for their individual circumstances. 

Last week, the IRS sent out an email reminding taxpayers that the last quarter of 2021 is a good time to check their withholding. Unfortunately, most taxpayers don't receive notices from the IRS. And most taxpayers don't even think about their withholding - until the time comes to file their return well after they can make adjustments. 

When an employer offers their employees an opportunity to check their withholding and adjust if needed, the employer is sending a message that they care about their team. They are no longer just "checking the box" of required paperwork, but are willing to do more than the minimum by offering an opportunity for employees to modify their withholding 

To share with your clients:

To give employees an opportunity to review and adjust their withholding, employers should distribute the following items to all employees. In addition, employers should let their employees know they are not required to complete the form and if they choose not to submit a new form, their withholding will continue based on the most recently completed W-4. 

1. The updated W-4 form, either through your payroll software, as a pdf, or on paper, 

2. The link to the IRS Tax Withholding Estimator, available in multiple languages including Spanish, and 

3. The link to the IRS FAQs on Form W-4.