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How to Handle IRS Lock-In Letters

Author: Alice Gilman

When an employee provides an employer with a completed and signed IRS Form W-4, the employee may claim on the form any level of withholding adjustments or marital status, or even complete exemption from income tax withholding. However, if the IRS finds that the employee is seriously underwithheld, it may issue a lock-in letter to the employer specifying the employee's filing status and providing withholding instructions for the employer to follow. An employer has specific duties to an employee and the IRS once it receives a lock-in letter.

The following steps will help an employer fulfill these duties.