Sometimes implementing a W-4 change can be a real task; especially when employees change the game time after time to juggle taxation. So, the question always comes up: Do I have to reflect the change immediately or is there a grace period for a payroll processor? Tune in and find out exactly what the IRS says you can do with this basic, but sometimes frustrating situation.
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EPISODE 7: HOW SOON DO I IMPLEMENT AN EMPLOYEE S NEW W-4?
Small Business Spoonfuls is a twice a week Q&A with Lisa Smith providing the answers to questions you have about running your small business. Hey there, this is Lisa Smith again coming to you from Atlanta and this is Small Business Spoonfuls. I m so excited once again to be here and talking to you guys today. I know I start every show like that talking about how excited I am but it s because I am. I love this and I love being out here and serving this audience of small business owners who are out there making it happen every day. Kudos to you for fighting the good fight because as we know it is a good fight sometimes, isn t it? Today we have a question that came in from a business owner who said they are having a lot of problems with about 5 or 6 employees where it concerns the W4. They asked me this question. Our employees come in to change their W-4s on a regular basis. I believe the law says we have to apply this to the next paycheck. Where can I find out if I really am required to honor every request they make? That was a really good question because it s one I do get quite often and it can be a little bit confusing and it can be a little bit frustrating to a business owner or the person who is doing payroll when you have people coming in literally every week wanting to change their W-4. Let s answer a couple of questions and then we will get to the heart of the answer here.
First question is can they do it? Can an employee just come in at will and change their W-4? The answer is absolutely they can. Yeah, I know, it s not good. They can because it s their right. We have nothing to say about their W-4. We don t really care what they put on their W-4 because it s none of our business quite honestly. If they come in everyday and say, I have had one new child every day or I have a new dependent or I no longer have dependents or now I do again, I mean, it s none of our business. They can do it.
The next question is, what can I do to put a stop to it as far as the abuse goes of it like constantly dragging down the payroll department? You can t really do anything to put a stop to it because it is their right under federal law to determine what their allowances are and how they want their tax to be withheld. We just have to do what they give us. The other part of it though, this is the actual part that solves your problem. The IRS says while most employers are taking the W-4 and applying it to the next paycheck, you don t have to be that generous. You do have to write a policy and know that your policies all have to be in writing no matter what they are but let s just say you are going to take an action towards all this abuse on the W-4. Maybe you have 50 employees but you only have these 5 or 6 that are causing you all the trouble. You still have to do everything the same way for all your employees and you can t just penalize the 5 or 6. As I explain this to you, don t start thinking I m going to do this to them. You have to do this to everyone. Federal law says when the employee hands you the new W-4 if your policy is in writing, you can say okay, we are going to look at the calendar here. We are going to jump forward 30 days. Whatever pay period you will be in at that point, this W-4 will be reflected in that next paycheck. What that means is this could be anywhere from 4-6 weeks before that W-4 they are handing you right now ever takes effect and hits a paycheck and that would be absolutely legal to do, as long as you have a written policy about, all your employees know about the policy and they have signed off on the policy. Then you enforce it equally among everyone. Those are very common HR things that we have to do and it does not change for this particular concern. That is pretty good news to have.
Now the problem is if you implement that, you are going to have 5 or 6 people that you control and the other 45 or so are going to be really angry with you. Maybe you do something to meet it in the middle, it s not going to be on this paycheck but it is going to be on the following one. That still may be enough to deter those folks who are out there trying to get instant gratification on their W-4 and kind of playing with the money back and forth and those kinds of things. Give it a try. It s not going to hurt anything.
If you want to read this for yourself, go to the IRS.gov website and you can download Publications 15 and 15A. In those two publications you have to kind of read through some stuff but you will be able to find the W-4 information where it specifically talks about this guideline. Go look for that. For those of you listening in today that are an authority member, you have our Audit Secure Authority membership at beauditsecure.com, then you may already know that through our helpdesk for payroll professionals module you have all of the main IRS documents that are in there for you. We always put all of the updates to the Publication 15 series every year along with several others. If there is something that you have not been able to find that we have not put in there yet, let us know. We are constantly updating it and we would be happy to put more help on your desk. Just tell us what you need. We will do that for you but for the rest of you, go out to IRS.gov, look it up and find it and read it for yourself. You will be able to take care of business. Write yourself a good policy. As far as I know there is nothing barring you from enforcing that policy in every industry and every type of job and every type of worker and so forth. You should be A-Okay. We could go on for days about what concerns the W-4 and we just don t have time to do that in these little spoonfuls but stay tuned because I will be bringing you more breakdowns of how we handle the W-4 because it is definitely one of the things I tell my clients and classroom folks, attendees that come to seminars, I tell them you have got to be auditing your W-4s. We are going to go into more audit detail in upcoming podcasts and of course for those of you that are members at Audit Secure Authority over at beauditsecure.com, you are going to find all kinds of information over there about how you can audit your W-4. That s good. Alright, that should answer that question.
Thank you for writing that in and we will definitely be getting back in touch with you for one of our t-shirts. Anytime you want to send a question into us, please do so. Go to smallbusinesspoonfuls.com. We have a speak pipe app there, just go ahead and speak your heart out and let us know what your question is. If we use your question on air, we will definitely send you one of our t-shirts. We have a t-shirt cannon waiting to blast that thing all the way to your house. Almost as good as a drone delivery, just not quite. I m a little crazy. Alright, so there you go.
Now it s time for HR Superstar. Today s HR Superstar goes out to a movie that if you are from the south, you have probably grown up around and know and love and if you are not from the south, I know you have seen it and heard of it and you probably loved it, too. That is if you are a woman, I don t know if men loved it that much or not. It is the movie Steel Magnolias. You know our favorite scenes from Steel Magnolias take place where? That s right in Truvy s Beauty Shop. Who works for Truvy? Annelle, that s right. Truvy and Annelle, Truvy s the employer, Annelle is the employee. When Annelle is not around and even a couple of times when she was there, Truvy would talk Annelle s business. Yeah, she did, you know it. They talked about what religion Annelle was these days, they talked about her personal life, they talked about all kinds of her past issues. She had a history of domestic violence and all kinds of things. Due to that, HR Superstar is giving a thumbs down to Truvy for the way she ran her beauty salon with her employee, Annelle. Now that being said, I love the movie but thumbs down for Truvy on that side of HR. I will say though thumbs up to the M Lynn character because you know she worked downtown at the Behavioral Health Agency, I guess it was sort of a county behavioral health center where they dealt with a lot of folks and they did a lot of counseling and mental health assistance and that type of thing. Truvy was always trying to get M Lynn to dish on the patients around town. As a matter of fact, one of my favorite lines is Truvy says, oh, come on, M Lynn there are a lot of sick tickets in this town. That might be true but M Lynn did not once break HIPAA and that is so important. No, not once did she say, I m giving up the privacy of our patients and I m just going to gossip about it to you but please don t tell anybody. No, she didn t do that. She was really good and she just kept a tight zipped up lip. HIPAA is an HR issue, so way to go, M Lynn so it s kind of a thumbs up/thumbs down kind of a 50/50 deal on today s version of HR Superstar but we will give it to them both. One good, one bad, lessons for everyone all around.
That will sum it up for today s episode no. 7. Stay tuned for episode no. 8 and I will see you then. Until then, I am Lisa Smith and I am out.
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