You may think that you have nothing to do with taxes or assisting individuals with their taxes as a payroll professional, but you would be wrong. The payroll department is responsible for withholding income taxes and submitting them to the appropriate taxing agencies (i.,e IRS, FTB, etc.). The withholding amount is based on what the employee reports on Form W-4. Therefore, Form W-4 is used to properly withhold federal and state income taxes when calculating their paychecks. In addition, payroll is responsible for issuing Form W-2 at the end of the year to all employees to do their tax returns. Technically, all the amounts reported in the W-2 are the responsibility of the payroll department. Finally, remember that payroll prepares employees’ paychecks based on information collected by Human Resources via W-4.
Read the following scenario and provide a recommendation:
Scenario
You are a payroll professional, and one of your employees has just come into the payroll department and asks you the following question:
"I am thinking of amending my Form W-4 so that I receive more money in my paycheck. I am thinking of changing my status and claiming more dependents. What do you think of my idea?"
1. How would you reply to this employee?
2. If the employee does make the changes without consulting the payroll professional, what is the income tax implication for this employee?
Note: Avoid giving generic and short answers. Analyze the situation and provide concrete and useful information an employee would understand.
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