One of our entrepreneurial minded QuickBooks students asked in class yesterday about employee W-4 forms.
She is looking to go into business with her son. She wanted to know about the IRS Schedule for withholding and so it gave us an opportunity to explore the W4 form
The W4 form is an excellent opportunity for employers to keep track of what's been going on with their employees an update their information. New boys always fill out the form, but a solid strong accounting practice is to ask all employees to fill out a new form at the beginning of each year.
Why a new W-4 form each year?
Threw out here a lot of changes can take place and people forget to report it to their employers. For example when somebody moves, somebody got married, and older child moving out and is no longer a dependent?
Another reason can be found directly on the instruction page that accompanies the form: Future developments - Information about any future developments affecting Form W-4 (such as legislation enacted after we release it).
The way Congress works, they can make rule changes at any time and they don’t have to warn you about them.
All of these things can make a big difference on the W4 form.
You don’t have to wait for an employer to supply you with the form, you can also do it yourself.
I had a friend who would intentionally ask for extra withholdings on his W-4 form. Why? Because he wanted a bigger refund on April 15th. When told he was just giving the government a free loan that's interest free, and that he could just put the money in the savings account, he replied that no it wouldn't work that way. He would just spend the money instead of saving it. This way since it was we hell before he got his check his paycheck each. He would not know he had it until it came at the end of the year.
That is definitely not a good smart way to say, but if you know yourself well, perhaps it's better than nothing.