How to Handle IRS Lock-In Letters

Author: Alice Gilman

An employee provides an employer with a signed Form W-4, Employee's Withholding Allowance Certificate, upon hire. The employee may claim any number of withholding allowances or marital status, or a complete exemption from income tax withholding on the Form W-4. However, the IRS may notify the employer that the employee is not entitled to claim an exemption from income tax withholding, the number of withholding allowances or the marital status the employee is claiming on a current Form W-4. These IRS notifications are commonly referred to as lock-in letters. An employer has specific duties to an employee and the IRS once it receives a lock-in letter.