9

I recognize W-4s are for calculating how much an employer should withhold from an employee for tax purposes. More allowances, less withheld. Less allowances, more withheld. This is the gist of it?

At my company, some employees have filled out W-4s while others have not. I'm confused at what the benefit of this is for the employee vs. the employer?

I honestly didn't realize that some employees do not have to fill out W-4s when on-boarding a job.

21

This is functionally the same as submitting a W4 claiming 0. The employee is defaulted to the highest withholding for taxes. Some people like the quasi-forced-savings aspect of excess withholdings and the resulting refund check(s).

It doesn't make an ounce of difference to the employer.

  • 4
    Beat me to it! Here's a link where the IRS says that: irs.gov/publications/p15 "If a new employee doesn't give you a completed Form W-4, withhold income tax as if he or she is single, with zero withholding allowances." +1 – BrianH Jun 5 at 18:22
  • Ah hm, so there's probably some salary threshold at the company for which they default an employee to claiming 0 / withholding highest amt. Like, we assume if you're making more than $X, you don't need to claim any allowances, unless you say otherwise (handing in a completed Form W-4). But if you make less than $X, we want you to calculate if you need to claim allowances. Right? – jed Jun 5 at 19:13
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    It has nothing to do with income it has to do with dependents and other tax considerations that an employer wouldn't know without being told by the employee. – quid Jun 5 at 19:14
  • And note that if you're going to fill it out as single/0 why bother? – Loren Pechtel Jun 6 at 1:30
  • @LorenPechtel: some people's circumstances change during the year. Also some people like to estimate in advance the number of allowances they'll need, to see if their estimated tax payment is accurate or not. And these days, "fill out a form" typically just means online, no stamp or paper needed. – smci Jun 6 at 15:19
12

There's two cases to consider where co-workers aren't really employees of the company:

Self-employed

These workers are independent contractors paid via a 1099. As self employed, they pay tax directly to the IRS and compute the appropriate allowances themselves.

Contract Employees

These employees are paid by a contractor or staffing service and would have submitted paperwork through their direct employer.

  • 2
    Another good point. Definitely a few employees who weren't asked to fill out W-4s at the company are either self-employed or contract. – jed Jun 5 at 19:18

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