The new Form W-4 just keeps on providing more and more info for us payroll professionals. We now turn to handling lock-in letters. The IRS has updated its FAQs to explain how to handle the lock-in letters using the new 2020 Form W-4. As a quick review on the background of lock-in letters.
If the IRS determines that an employee does not have enough withholding, they will notify the employer to increase the amount of withholding tax by issuing a “lock-in” letter that specifies the withholding arrangement permitted for the employee. The employer will also receive a copy for the employee that identifies the withholding arrangement permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate withholding arrangement. If the employee still works for for the employer, the employer must furnish the employee copy to the employee. If the employee NO LONGER WORKS for the employer, NO ACTION IS REQUIRED. However, if the employee should return to work within twelve (12) months, the employer should begin withholding income tax from the employee’s wages based on the withholding arrangement stated in this letter. The employee will be given a period of time before the lock-in rate is effective to submit for approval to the IRS a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee must send the Form W-4 and statement directly to the IRS office designated on the lock-in letter. The employer must withhold tax in accordance with the lock-in letter as of the date specified in the lock-in letter, unless otherwise notified by the IRS. The employer will be required to take this action no sooner than 60 calendar days after the date of the lock-in letter. Once a lock-in rate is effective, an employer cannot decrease withholding unless approved by the IRS.
The new FAQs include:
- how to handle revised W-4s after the lock-in letter is received
- How to handle a modification letter
- Handling employee self service portals and lock-in letter
The site still includes info on how to handle lock-in letters using the 2019 and prior forms.
The U.S. Department of the Treasury and the Internal Revenue Service have issued 
The proposed regulations permit employees to use the new IRS Tax Withholding Estimator (
To help workers more effectively adjust their withholding, the improved Tax Withholding Estimator features a customized refund slider that allows users to choose the refund amount they prefer from a range of different refund amounts. The exact refund range shown is customized based on the tax information entered by that user. Based on the refund amount selected, the Tax Withholding Estimator will give the worker specific recommendations on how to fill out their W-4. This new feature allows users who seek either larger refunds at the end of the year or more money on their paychecks throughout the year to have just the right amount withheld to meet their preference.
y based on the worker’s expected filing status and standard deduction for the year. In addition, workers can choose to have itemized deductions, the Child Tax Credit and other tax benefits reflected in their withholding for the year. It is important for people with more than one job at a time (including families in which both spouses work) to adjust their withholding to avoid having too little withheld. Using the Tax Withholding Estimator is the most accurate way to do this.
Keep up on all the latest payroll news for 2020. 
Our new payroll lecture series for 2020 is here. Our first lecture is on 
I want to remind every one of my followers that the early bird pricing for my latest webinar will end on December 3rd. This lecture will focus on just the new year. So I am calling it “Ringing in the New Year–2020”. For only $149 I will cover all the latest for 2020. This includes:
Many states have posting requirements in addition to the ones required by the FLSA. The state may have its own minimum wage poster. It may require a payday notice or copies of the wage and hour laws be posted or given directly to the employee. State with payday notice regulations include California, Montana, Minnesota, Texas, Tennessee and New York For those states who have them, including California, Connecticut, Colorado, Massachusetts, New Jersey, and New York, wage orders are usually required to be posted as well.
in frequency, such as semi-monthly or weekly. Arizona requires that the employer designate two or more days in each month to pay employees and the days cannot be more than 16 days apart. New York bases its requirements on whether the employee is a manual worker, a clerical worker or other type of worker. Most states require either biweekly or semimonthly paydays. These include California, Illinois and New Mexico. Other states permit monthly payrolls including Alaska, Delaware and Washington. Be sure when researching to also check into the amount of time permitted between closing the payroll (collecting the timesheets) and paying the employees. States do have requirements on what can be called “payroll processing time” or “lag time”.
There is no requirement under the FLSA as to the method to pay an employee. Almost all the states do address this issue. The common requirement is the employee be paid by U.S. currency or check. The federal government does regulate the paying of employees via direct deposit under the Electronic Funds Transfer Act. The Act was recently updated to include the newest method of payment of employees—payroll debit cards. The states are updating their regulations for payroll debit cards. The payroll professional must determine if the state allows this form of payment if it intends to begin a pay card payment program and what restrictions may be in place. These restrictions include limiting fees and voluntary participation.
freedom could require this time to be compensated. However, the states may view it differently. In most states the degree of control the employer has over the employee’s time and whether the employee is free to use his or her time for his or her own purposes is the guiding factor in whether or not the time is compensable.
Each year payroll professionals attend year end webinars or live events to get the latest news on how to close out the old year and begin the new one. This year I am offering something a little different than “year end”. My next lecture will focus on just the new year. So I am calling it “Ringing in the New Year–2020”. In this 90-minute lecture I will cover all the latest for 2020. This includes:
first official change. The states have not had time to catch up to these new regulations but should address this issue in 2020 as the legislatures start meeting. So far, states that differ from the FLSA include Alaska, California, Hawaii and Montana.
The FLSA has a standard. However since the states were the first to introduce the concept of a minimum wage (Massachusetts circa 1912) and the federal rate has rarely kept up with inflation (the last update was 10 years ago) this is an area where payroll sees the biggest difference between the FLSA and the states. 29 states have a higher minimum wage than the federal, 14 states are equal to the $7.25, 2 states are lower, and 5 states have no minimum wage provisions.
certain employees. The state requirements can range from forbidding tip credit as in CA and NV to matching the federal to anywhere in between. It is important to verify the definition of a tipped employee including the dollar limits if any and the percentage or dollar amount permitted for the credit.
Regular rate of pay is the calculated rate that is used to pay overtime under the FLSA. It can be affected by such payments as nondiscretionary bonuses and commissions. The state could require a different definition. In this area, most states are less strict than the FLSA. An example is Arizona which requires that the minimum wage of the state be considered the regular rate of pay.