IRS Issues 2015 Form W-4

Author: Rena Pirsos, XpertHR Legal Editor

December 12, 2014

The IRS has released the 2015 Form W-4, Employee's Withholding Allowance Certificate, which employers use to determine the amount of federal income taxes to withhold from employees' pay. A new employee must provide a completed Form W-4 to his or her employer on the first day of work.

Employees who claimed exempt status in 2014 and wish to continue their exemption for 2015 must do the following:

  • Complete a new form by filling in only Boxes 1, 2, 3, 4 and 7;
  • Sign the form to validate it; and
  • Submit it to their employer's payroll department by February 17, 2015.

An employee may not claim exempt status in 2015 if:

  • His or her income exceeds $1,050 (up from $1,000 in 2014) and includes more than $350 (unchanged from 2014) of unearned income (e.g., interest and dividends); and
  • He or she can be claimed as a dependent on another individual's tax return.

If an employee whose exemption expires on February 17 does not submit a new form, the employer should withhold based on the last Form W-4 on file for the employee that did not claim exemption from withholding. If no prior form was submitted, or a new employee fails to submit a completed form, the employer should withhold as if the employee were single and claiming no withholding allowances until he or she submits a new Form W-4.

To assist employees, an employer may wish to advise them to use IRS Publication 505, Tax Withholding and Estimated Tax (the 2015 version has not yet been released), to confirm that the amount they are having withheld from their pay approximates their projected income tax liability. They may also wish to inform employees that their withholding must be based on allowances they claim and may not be a flat amount or percentage of wages. Nonresident alien employees should be advised to follow the special instructions provided in IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens, before they complete Form W-4.

The IRS encourages employers at this time of year to remind employees to review their withholding and fill out and submit a new Form W-4 to the payroll department if necessary. Some examples of employees who may need to submit a revised Form W-4 include:

  • Individuals and couples with multiple jobs;
  • Employees who are expecting or who have just had a child;
  • Those getting married or divorced;
  • Those buying a new home; and
  • Those who typically have a balance due or large tax refund at the end of the year.