Employees use Form W-4, “Employee’s Withholding Certificate,” to tell employers how much
modified, incomplete, or accompanied by unusual statements—or when an IRS “lock-in” letter is involved—
employers need a clear, consistent process.
The goal is simple: meet your withholding obligations while avoiding unnecessary involvement in an employee’s
personal tax dispute.
How to spot an invalid Form W-4
Employees are responsible for the information they provide on Form W-4 and sign the form under penalties of
perjury. In general, employers aren’t expected to verify whether an employee’s tax filing choices and
calculations are correct.
That said, a Form W-4 should be treated as invalid when the employee:
- Alters the official form
- Removes or crosses out the penalties-of-perjury declaration
- Indicates that information on the form is false
You should also reject any substitute form created by the employee. (In some cases, an electronic or
employer-provided substitute may be acceptable if it meets IRS requirements.)
What to do if you receive an invalid W-4
If an employee submits a W-4 that appears invalid, let them know you can’t accept it and request a valid
replacement. In most cases, you may continue using a valid W-4 you already have on file until the employee
provides the corrected form.
If you don’t have a valid W-4 on file, you generally withhold using the default approach: treat the employee
as “single or married filing separately” with no entries in Steps 2, 3, or 4.
Exemption from withholding: not automatically invalid
An employee’s claim of exemption from withholding is not automatically wrong, but it must meet the applicable
eligibility rules. For the 2026 Form W-4, employees claiming exemption use the exemption
checkbox on the form.
For 2026, an employee generally may claim exemption only if they had no federal income tax liability in
2025 and expect to have none in 2026. The responsibility for determining eligibility
rests with the employee—not the employer.
Understanding IRS “lock-in” instructions
Employers generally aren’t required to routinely submit Forms W-4 to the IRS. Typically, you submit forms only
when the IRS directs you through written notice or specific published guidance.
When the IRS believes an employee’s withholding may be too low, it may issue a lock-in letter.
This letter specifies the filing status and withholding adjustments the employee must use going forward.
Before the lock-in rules take effect, the employee receives a separate notice and an opportunity to dispute the
determination directly with the IRS.
Once the lock-in takes effect
After the lock-in instructions become effective, you generally must ignore any Form W-4 that would reduce
withholding below the IRS-mandated amount.
However, you should still honor any new Form W-4 that results in more withholding.
If your payroll system accepts Forms W-4 electronically, it should also prevent a locked-in employee from
lowering withholding below the required level.
If the employee disagrees with the lock-in, they must work with the IRS. They may submit a new Form W-4 and
supporting information as directed in the IRS notice. Until the IRS authorizes changes, you should not reduce
withholding.
Failing to follow lock-in requirements can expose your business to liability for additional tax that should have
been withheld.
Build consistent internal procedures
Strong payroll controls reduce the risk of costly errors. Consider documenting how W-4s are:
- Submitted
- Reviewed
- Stored and retained
Train payroll personnel to recognize altered or unauthorized documents. At the same time, avoid asking staff to
determine whether an employee’s tax calculations are “correct.” That decision generally belongs to the
employee and—when applicable—the IRS.
Where to direct employees with W-4 questions
If employees ask for help completing Form W-4, direct them to the IRS Tax Withholding Estimator or encourage
them to consult their personal tax advisors. Unless your organization is authorized to provide individualized
tax guidance, avoid offering individualized tax advice.
Need help handling a questionable W-4 or lock-in letter?
Unusual W-4 submissions and IRS lock-in letters can create compliance risk when they aren’t handled correctly.
If you want to strengthen your processes—or need support responding to an invalid form or complying with an IRS
lock-in—reach out to Botwinick.
We can help you navigate withholding rules to reduce the risk of avoidable payroll mistakes.
