Accepted Answer

Hello martin,

It used to be required by the IRS that if an employer received a W-4 form from an employee who was making more than $200 per week in wages and the employee claimed exempt status, the employer was required to submit a copy of that W-4 form to the IRS. This is no longer required.

Now if an employee gives you a W-4 marked exempt, you should simply not withhold any tax. If your payroll program does not permit you to "turn off" federal taxes, simply increase the number of withholding allowances to a high enough number where no taxes are withheld.

If at some point in the future the IRS determines that a particular employee is not having enough tax withheld from his checks, you will receive a "lock-in letter" from the IRS which mandates the number of withholding allowances you must start using for a specific employee.

http://www.irs.gov/individuals/article/0,,id=139412,00.html

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Thank you martin

Expert:	Merlo
Pos. Feedback:	99.8 %
Accepts:
Answered:	10/29/2009

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad