IRS Lock-In Letters – What’s An Employer To Do?

Companies often ask employees to select the amount of tax withholdings for paydays. Occasionally, employees will fail to hold back a sufficient amount in the eyes of the IRS. The IRS will then send out a “lock-in” letter on the add up to be withheld. What’s an employer to accomplish?


Four taxes must be help back from employee paychecks – Medicare insurance, Social Security, Federal Income and State Income tax. The Medicare tax is set at roughly 1 . 5% of salary while social safety is set at 6.
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2 percent. The withholding for federal and state income tax, however , is susceptible to adjustments made by employees. The amount of taxes required to be withheld by the IRS requires a calculation beyond the scope of this article, but you can look to the “Employer’s Tax Guide” on the IRS web site.

If an employee claims excessive deductions that result in insufficient withholdings, the IRS may respond. The typical response is to send an employer a “lock-in” letter.

The lock-in letter shows the employer to increase the amount of withholding taxes of the employee. The IRS can actually specify the maximum number of withholding exemptions the employee can claim. The more exemptions claimed, the less tax withheld in each salary. The IRS will also send a copy of the correspondence to the worker.

As an employer, you must comply with the IRS lock-in letter. The IRS will designate a specific compliance day. Better to have died a small kid than fail to comply with the notice. Failure to comply will result in the particular tax liability transferring from the employee to the employer. The employer can also expect the unwanted attention of IRS auditors. In short, make absolutely sure you comply with the lock-in letter.

Exactly what should you do if you receive a lock-in letter, but the employee no longer works? You must send a written reaction to the IRS office listed in the particular correspondence. The response must state the employee no longer works for you and the last date of employment towards the best of your knowledge.

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