Special IRS Regulations


  1. IRS and State Franchise Tax Board regulations require an employer to withhold income tax from an employee's wages based on a form W-4, Employees Withholding Allowance Certificate, or DE-4, which each employee must file with the employer. The forms remain in effect until a new form is filed by the employee. (See exhibit 6070-1)
  2. IRS and State Tax Board regulations also require the employer to submit copies of W-4 or DE-4 to the IRS and the tax board each quarter when an employee claims exemption from income tax withholding or claims an excessive withholding allowance.

Exemption from Income Tax Withholding

An employee may claim to be exempt from income tax withholding because of no income tax liability in the previous year and the expectation of none during the current year. The employee must file a new form W-4, DE-4, in January each year to claim exemption from withholding.

Excessive Withholding Allowances

  1. An employee who claims more than ten (10) withholding allowances is considered to have claimed excessive allowances. IRS audits the tax liability of the employee and ascertains that the proper taxes are being withheld to meet the tax liability.
  2. If the audit finds that the amount being withheld is insufficient to meet the liability, the IRS notifies the employer of the proper withholding allowance. The employer is then required to withhold taxes as directed by the IRS regardless of what the employee has certified.


Questions should be directed to: 619-388-6582