MASTERING MANAGEMENTStamp Out Tax Protesters at
Your Company CHANTILLY, VA - Illegal tax protestors may wind up working for you and calling unnecessary Internal Revenue Service (IRS) attention to your company, according to a recent Automotive Parts Rebuilders Association (APRA) BizActions newsletter. One common tactic that protestors use is to file fraudulent W-4 forms with their employers so they don't have any tax withheld from their wages. Recently, some employees have even given their companies phony - but official-looking - forms in an attempt to avoid withholding.
The problem of questionable W-4s is enormous. Before the rules changed, the IRS estimated that approximately 600,000 questionable W-4 forms were forwarded by employers each year.Despite the fact that tax protestors are routinely penalized by the IRS and the courts, the number of people who try to illegally avoid paying taxes seems to grow every year. You may even find the discontent spilling over into the workplace. APRA gives some pointers to follow to avoid this situation.
The practice usually starts with a bogus W-4 form filed with your payroll department. Watch out for tip-offs, such as a faulty claim for tax-exempt status, entries for an extraordinary number of withholding allowances, or other false or misleading information. If an employee delivers a 10-page manifesto as to why withholding taxes violates the spirit of the U.S. Constitution, you've got a tax protester on your hands.
Although it's good to be proactive when you have a malcontent on staff who might affect morale, the actions you are required to take are now limited.
The employer's responsibility Previously, employers who were presented with W-4s that seemed problematic were required to automatically send those forms to the IRS so the Agency could determine whether the employees were trying to dodge their federal income tax responsibilities. A change in federal payroll tax rules eliminated this requirement as of April 14, 2005. Under the new rules, an employer is only required to submit copies of W-4 forms to the IRS when specifically told to do so in a written notice or in published guidance that applies to all employers. This doesn't suggest that the IRS isn't concerned about questionable W-4s. Instead of making the employer responsible for spotting problems, the Agency has developed a new procedure that uses information already reported on the employee's W-2 form to identify individuals who may be out of compliance with federal income tax withholding rules. If an employee is thought to have a serious withholding problem, the IRS will notify the employer to withhold federal income tax from that employee's wages at an appropriate rate. However, the IRS still has the power to issue a written notice to an employer that requires submission of copies of W-4 forms for specified employees. Also, if the IRS determines that a specific employee cannot claim more than a certain number of withholding exemptions or should not be allowed to be completely exempt from withholding, the employee - not the employer - must deal directly with the IRS by supplying a new W-4 and a written statement that supports his or her claims. The employer is taken out of the loop. The employee generally has 45 days to resolve the issue with the IRS before the employer is required to implement withholding changes.
Recommendations Make it clear to employees that your company follows the rules and regulations of the Internal Revenue Code to the best of its ability. Create strict deadlines for filing W-4s to deter timing scams. But what if an employee doesn't give you a completed W-4 form? The IRS instructs employers to withhold tax as if the employee is single, with no withholding allowances. Be on the lookout: Phony but official-looking forms have been making the rounds among employers. They include Form W-4T (Voluntary Withholding Agreement, Termination or Withdrawal From W-4 Agreement) and Form SSN (Citizen's Assertion of Legal Right to Withhold Disclosure of SSN). If you come across either one, you should confront the employee who submitted it and notify the IRS.
(Source: APRA) 
