IRS Collections “Lock in” letters are usually quite rare, however when they are issued it can be a hurtful event for the struggling taxpayer already looking for ways to add to the household income bottom line. Employer Human Resource departments have no choice but to cooperate, employer and employee relations can often become strained.
Once hired, all employees are usually required to fill out a series of forms for the new employer:
- An I-9, Employment Eligibility Verification
- A W-4, Employees Withholding Allowance Certificate
- Employer Handbook
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Exemption claims are exactly that, more children, more dependents, an acquired spouse will increase the ability to claim higher exemptions.
Always remember, paying taxes is voluntary. Yeah right. If a person is single with no dependents the correct withholding claim is “0 or 1” exemption. Claiming “0” allows the employer to withhold at a higher rate resulting in more taxes withheld. Usually when more taxes are withheld the larger the refund check. Claim for refund is filed via a current filing of your annual tax return, Form 1040.
If the same employee claims a “1” on the W-4, generally the tax refund will not be as large because of a smaller amount of withholding, most likely a manageable tax bill to pay.
Sometimes employees think there is something here that will allow them to game the tax system and begin to claim higher claims for exemptions. If the person is single but decides to claim an exemption amount of “10”. Well, basically no taxes will be withheld and the paycheck becomes larger. Awesome right? Not so fast.
Upon filing your annual tax return you will notice a larger tax bill owed to the federal and state government due on April 15th of every calendar year. If neglected long enough the IRS will order you to claim “0” exemptions via the ever notorious “Lock-in” letter.
For those who make over $100K per year, under withholding at a 15% rate vs. a correct amount of 20% the tax balances become large, can and will spin out of control very quickly.
Be diligent, understand the actions required to stay out of hot water. If you have life tax questions, call 1 – 8 6 6 – 2 2 6 – 6 1 0 2 for solid tax advice, tax relief is a phone call away. Tax pros looking to help is what DWK Tax Group provides.
FREE Tax Relief consultation call DWK Tax Group at 1-866-226-6102. https://dwktaxgroup.com