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bryanktracy1
Level 1

Why would an employer not withhold federal taxes?

My wife is a teacher and switched school districts last year.  She filled out her W4 exactly the same way for each; selecting Married filing jointly in Step 1 and noting $4,000 in Step 3 (because of our 2 young children).  However, whereas her old employer would previously withhold federal taxes from each paycheck, her new employer is not.  And her salary is essentially the same.  To correct this, she recently filled out a new W4 and entered a dollar amount to be withheld in Step 4c.   This should mostly fix the issue (and ultimately reduce the amount we'll owe in April), but I am wondering why she would even need to do this in the first place.  Why would her new employer not withhold taxes based on the settings mentioned above - when the old one was doing that.  I think the issue is on the employer's side, but they seem unwilling to admit that.  

2 Replies
Donna F 77
Employee Tax Expert

Why would an employer not withhold federal taxes?

Hi bryanktracy1!
The new withholding tables and method of calculating the withholding can be tricky for employers to learn.  It is quite possible that the new employer had the withholding calculating incorrectly.  The Form W-4 and method of calculating withholding changed in January of 2020.  Employers are still learning the correct calculations.  If all the information was virtually the same (salary and W-4 selections), then both employers should calculate roughly the same amount of tax.  I'm glad that your wife was able to submit a new W-4 with the "additional" amount so that she can have some withholding coming out of her paycheck.  You may be able to find a paycheck calculator tool online to check the withholding.  Here's a link to one that you may want to try:

https://www.adp.com/resources/tools/calculators/salary-paycheck-calculator.aspx

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Kimberly F
Employee Tax Expert

Why would an employer not withhold federal taxes?

There can be several reasons why no federal income tax was withheld from an employees payroll.

 

The employer may have made a mistake when entering the W-4 withholding information into their payroll system. Or the employee may have indicated they are exempt from federal tax withholding (in error)  when they  completed the Form W-4. You can request a copy of the W-4 from your employer to see if either of either of these scenarious occurred.

  

In some cases, however, an employee may actually be exempt from withholding.  If an employee qualifies, he or she can also use Form W-4 to tell you not to deduct any federal income tax from his or her wages. To qualify for this exempt status, the employee must have had no tax liability for the previous year and must expect to have no tax liability for the current year.

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