Human Resources (HR) Software
W-4 Annual Update Letter
Note: This is a template letter which has been offered by Janice Hoffstedder as a starting point for the annual staff notice on this topic.
In our efforts to provide all employees with human resource services that enhance their quality of life, we look for ways to keep life simple and problems to a minimum. One way we can do that is by highlighting some of the key points related to the proper withholding of federal income taxes from taxable wages and income during the year.
Employees should review their projected financial information for the current year and next year and even visit with a tax professional, if necessary, to ensure that their Federal Form W-4 is properly completed and up to date. In order to avoid the penalties associated with the under withholding of federal taxes from wages, including supplemental wages, during the year employees can complete a new Form W-4 to be sure the appropriate tax amounts are withheld from their paychecks. While staff can complete a new W-4 at any time during the year, doing so near the beginning of the year helps assure proper withholding.
If any employees need to complete a new W-4 for 2008, they can access the “IRS FormW-4” from the HR department or directly online from the IRS.gov web site, or contact your payroll specialist for further assistance.
Please note that the HR department will withhold federal income tax from supplemental wage payments as outlined in IRS Publication 15, Circular E, Employer’s Tax Guide. These guidelines are located in the “Supplemental Wages” section of this publication. Supplemental wages include, but are not limited to, bonuses, commissions, taxable fringe benefits, etc. In general, the Human Resources department will withhold federal income taxes at the 25 percent rate for employee supplemental wages throughout the year. With the $1 million threshold under Section 904(b) of the American Jobs Creation Act of 2004 (“Jobs Act”), the HR department will be withholding at a flat rate based on the maximum tax rate in effect under Section 1 of the Internal Revenue Code, currently 35%, when an employee’s supplemental wages are in excess of $1 million in a calendar year. IRS guidelines do not allow an employee to complete a Federal Form W-4 specifically for a supplemental wage payment.
Please contact your payroll specialist if you require further information on this topic. We appreciate the opportunity to serve you.