[Code of Federal Regulations]
[Title 26, Volume 15]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR31.3402(f)(2)-1]
[Page 220-225]
TITLE 26--INTERNAL REVENUE
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
(CONTINUED)
PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
Subpart E_Collection of Income Tax at Source
Sec. 31.3402(f)(2)-1 Withholding exemption certificates.
(a) On commencement of employment. On or before the date on which an
individual commences employment with an employer, the individual shall
furnish the employer with a signed withholding exemption certificate
relating to his marital status and the number of withholding exemptions
which he claims, which number shall in no event exceed the number to
which he is entitled, or, if the statements described in Sec.
31.3402(n)-1 are true with respect to an individual, he may furnish his
employer with a signed withholding exemption certificate which contains
such statements. For form and contents of such certificates, see Sec.
31.3402(f)(5)-1. The employer is required to request a withholding
exemption certificate from each employee, but if the employee fails to
furnish such certificate, such employee shall be considered as a single
person claiming no withholding exemptions.
(b) Change in status which affects calendar year. (1) If, on any day
during the calendar year, the number of withholding exemptions to which
the employee is entitled is less than the number of withholding
exemptions claimed by him on the withholding exemption certificate then
in effect, the employee must within 10 days after the change occurs
furnish the employer with a new withholding exemption certificate
relating to the number of withholding exemptions which the employee then
claims, which must in no event exceed the number to which he is entitled
on such day. The number of withholding exemptions to which an employee
is entitled decreases, for example, for any one of the following
reasons:
[[Page 221]]
(i) The employee's wife (or husband) for whom the employee has been
claiming a withholding exemption (a) is divorced or legally separated
from the employee, or (b) claims her (or his) own withholding exemption
on a separate certificate.
(ii) In the case of an employee whose taxable year is not a calendar
year, the employee's wife (or husband) for whom the employee has been
claiming a withholding exemption dies in that portion of the calendar
year which precedes the first day of the taxable year of the employee
which begins in the calendar year in which the spouse dies.
(iii) The employee finds that no exemption for his taxable year
which begins in, or with, the current calendar year will be allowable to
him under section 151(e) in respect of an individual claimed as a
dependent on the employee's withholding exemption certificate.
(iv) It becomes unreasonable for the employee to believe that his
wages for an estimation year will not be more, or that the determinable
additional amounts for each item under Sec. 31.3402(m)-1 for an
estimation year will not be less, than the corresponding figure used in
connection with a claim by him under section 3402 (m) of a withholding
allowance to such an extent that the employee would no longer be
entitled to such withholding allowance.
(v) It becomes unreasonable for an employee who has in effect a
withholding exemption certificate on which he claims a withholding
allowance under section 3402(m), computed on the basis of the preceding
taxable year, to believe that his wages and the determinable additional
amounts for each item under Sec. 31.3402(m)-1 in such preceding taxable
year or in his present taxable year will entitle him to such withholding
allowance in the present taxable year.
(2) If, on any day during the calendar year, the number of
withholding exemptions to which the employee is entitled is more than
the number of withholding exemptions claimed by him on the withholding
exemption certificate then in effect, the employee may furnish the
employer with a new withholding exemption certificate on which the
employee must in no event claim more than the number of withholding
exemptions to which he is entitled on such day.
(3) If, on any day during the calendar year, the statements
described in Sec. 31.3402(n)-1 are true with respect to an employee,
such employee may furnish his employer with a withholding exemption
certificate which contains such statements.
(4) If, on any day during the calendar year, it is not reasonable
for an employee, who has furnished his employer with a withholding
exemption certificate which contains the statements described in Sec.
31.3402(n)-1, to anticipate that he will incur no liability for income
tax imposed under subtitle A (as defined in Sec. 31.3402(n)-1) for his
current taxable year, the employee must within 10 days after such day
furnish the employer with a new withholding exemption certificate which
does not contain such statements. If, on any day during the calendar
year, it is not reasonable for such an employee whose liability for
income tax imposed under subtitle A is determined on a basis other than
the calendar year to so anticipate with respect to his taxable year
following his current taxable year, the employee must furnish the
employer with a new withholding exemption certificate which does not
contain such statements within 10 days after such day or on or before
the first day of the last month of his current taxable year, whichever
is later.
(c) Change in status which affects next calendar year. (1) If, on
any day during the calendar year, the number of exemptions to which the
employee will be, or may reasonably be expected to be, entitled under
sections 151 and 3402(m) for his taxable year which begins in, or with,
the next calendar year is different from the number to which the
employee is entitled on such day, the following rules shall be
applicable:
(i) If such number is less than the number of withholding exemptions
claimed by the employee on a withholding exemption certificate in effect
in such day, the employee must, on or before December 1 of the year in
which the change occurs, unless such change
[[Page 222]]
occurs in December, furnish his employer with a new withholding
exemption certificate reflecting the decrease in the number of
withholding exemptions. If the change occurs in December, the new
certificate must be furnished within 10 days after the change occurs.
The number of exemptions to which an employee is entitled for his
taxable year which begins in, or with, the next calendar year decreases,
for example, for any of the following reasons:
(a) The spouse or a dependent of the employee dies.
(b) The employee finds that is not reasonable to expect that an
individual claimed as a dependent on the employee's withholding
exemption certificate will qualify as a dependent of the employee for
such taxable year.
(c) It becomes unreasonable for an employee who has in effect a
withholding exemption certificate on which he claims a withholding
allowance under section 3402(m) to believe that his wages and the
determinable additional amounts for each item under Sec. 31.3402(m)-1
for his taxable year which begins in, or with, the next calendar year
will entitle him to such withholding allowance for such taxable year.
(ii) If such number is greater than the number of withholding
exemptions claimed by the employee on a withholding exemption
certificate in effect on such day, the employee may, on or before
December 1 of the year in which such change occurs, unless such change
occurs in December, furnish his employer with a new withholding
exemption certificate reflecting the increase in the number of
withholding exemptions. If the change occurs in December, the
certificate may be furnished on or after the date on which the change
occurs.
(2) If, on any day during the calendar year, it is not reasonable
for an employee, who has furnished his employer with a withholding
exemption certificate which contains the statements described in Sec.
31.3402(n)-1 and whose liability for such tax is determined on a
calendar-year basis, to anticipate that he will incur no liability for
income tax imposed under subtitle A (as defined in Sec. 3l.3402(n)-1)
for his taxable year which begins with the next calendar year, the
employee must furnish his employer with a new withholding exemption
certificate which does not contain such statements, on or before
December 1 of the first-mentioned calendar year. If it first becomes
unreasonable for the employee to so anticipate in December, the new
certificate must be furnished within 10 days after the day on which it
first becomes unreasonable for the employee to so anticipate.
(3) Before December 1 of each year, every employer should request
each of his employees to file a new withholding exemption certificate
for the ensuing calendar year, in the event of change in the employee's
exemption status since the filing of his latest certificate.
(d) Inclusion of account number on withholding exemption
certificate. Every individual to whom an account number has been
assigned shall include such number of any withholding exemption
certificate filed with an employer. For provisions relating to the
obtaining of an account number, see Sec. 31.6011 (b)-2.
(e) Invalid withholding exemption certificates. Any alteration of or
unauthorized addition to a withholding exemption certificate shall cause
such certificate to be invalid; see paragraph (b) of Sec.
31.3402(f)(5)-1 for the definitions of alteration and unauthorized
addition. Any withholding exemption certificate which the employee
clearly indicates to be false by an oral statement or by a written
statement (other than one made on the withholding exemption certificate
itself) made by him to the employer on or before the date on which the
employee furnishes such certificate is also invalid. For purposes of the
preceding sentence, the term ``employer'' includes any individual
authorized by the employer either to receive withholding exemption
certificates, to make withholding computations, or to make payroll
distributions. If an employer receives an invalid withholding exemption
certificate, he shall consider it a nullity for purposes of computing
withholding; he shall inform the employee who submitted the certificate
[[Page 223]]
that it is invalid, and shall request another withholding exemption
certificate from the employee. If the employee who submitted the invalid
certificate fails to comply with the employer's request, the employer
shall withhold from the employee as from a single person claiming no
exemptions (see Sec. 31.3402 (f)(2)-1(a)); if, however, a prior
certificate is in effect with respect to the employee, the employer
shall continue to withhold in accordance with the prior certificate.
(f) Applicability of withholding exemption certificate to qualified
State individual income taxes. The withholding exemption certificate
shall be use for purposes of withholding with respect to qualified State
individual income taxes as well as Federal tax. For provisions relating
to the withholding exemption certificate with respect to such State
taxes, see paragraph (d)(3)(i) of Sec. 301.6361-1 of this chapter
(Regulation on Procedure and Administration).
(g) Submission of certain withholding certificates--(1) General
rule. With respect to withholding exemption certificates received after
November 30, 1986, an employer shall submit, in accordance with
paragraph (g)(3) of this section, a copy of any withholding exemption
certificate, together with a copy of any written statement received from
the employee in support of the claims made on the certificate, which is
received from the employee during the reporting period (even if the
certificate is not in effect at the end of the quarter) if the employee
is employed by that employer on the last day of the reporting period and
if--
(i) The total number of withholding exemptions (within the meaning
of section 3402(f)(1) and the regulations thereunder) claimed on the
certificate exceeds 10, or
(ii) The certificate indicates that the employee claims a status
exempting the employee from withholding, and the exception provided by
paragraph (g)(2) of this section does not apply.
(2) Exception. A copy of the certificate shall not be submitted
under paragraph (g)(1)(ii) of this section if the employer reasonably
expects, at the time the certificate is received, that the employee's
wages (under chapter 24 of the Code) from that employer shall not then
usually exceed $200 per week.
(3) Rules for submission--(i) In general. The reporting period is a
calendar quarter. Copies required to be submitted under paragraph (g)(1)
of this section shall be submitted at the time and place of filing Form
941 or 941E for the reporting period, or Form 941-M for the last month
of the reporting period. Form 941, 941E or 941-M shall be used, in
accordance with the instructions for the form, to transmit the copies.
(ii) Option. At the choice of the employer, copies required to be
submitted under paragraph (g)(1) of this section may be submitted
earlier and for shorter reporting periods than a calendar quarter. In
such case, the employer shall submit the copies to the service center
where the employer would file a Form 941 or 941E and shall include with
the submission a statement showing the employer's name, address,
employer identification number, and the number of copies of withholding
exemption certificates submitted. However, in no event shall a copy be
submitted later than the time for filing the report required to be
submitted for the calendar quarter reporting period under subdivision
(i) of this paragraph (g)(3).
(iii) First report. The first submission of copies shall include a
copy of any certificate required to be submitted under paragraph (g)(1)
of this section which is received by the employer on or after April 1,
1980.
(4) Other withholding exemption certificates. An employer shall also
submit a copy of any currently effective withholding exemption
certificate (or make the original certificate available for inspection),
together with a copy of any written statement received from the employee
in support of the claims made on the certificate, upon written request
of the Internal Revenue Service. This request of the Service may relate
either to one or more named employees or to one or more reasonably
segregable units of the employer. In this regard, the Service may, by
written notice, advise the employer that a copy of each new withholding
exemption certificate received from one or more named employees, or from
one or more reasonably segregable units of
[[Page 224]]
the employer, which is required, under this paragraph (g) to be
submitted to the Service is to be submitted to the District Director.
The employer shall then submit to the District Director a copy of each
such new certificate of each such employee immediately after the
employer receives the new certificate from the named employee.
(5) Computation of withholding. (i) Until receipt of written notice
from the Internal Revenue Service that a certificate, a copy of which
was submitted under this section, is defective, that certificate is
effective and the employer shall withhold on the basis of the statements
made in that certificate, unless that certificate must be disregarded
under the provisions of paragraph (g)(5)(vi) of this section.
(ii) The Internal Revenue Service may find that a copy of a
withholding exemption certificate submitted contains a materially
incorrect statement or it may determine, after written request to the
employee for verification of the statements on the certificate, that it
lacks sufficient information to determine if the certificate is correct.
If the Internal Revenue Service so finds or determines and notifies the
employer in writing that the certificate is defective, the employer
shall then consider the certificate to be defective for purposes of
computing amounts of withholding.
(iii) If the Internal Revenue Service notifies the employer that the
certificate is defective, the Internal Revenue Service will, based upon
its findings, advise the employer that the employee either is not
entitled to claim a status exempting the employee from withholding or is
not entitled to claim a total number of withholding exemptions in excess
of a number specified by the Internal Revenue Service in the notice, or
both. The Internal Revenue Service will also specify the Internal
Revenue Service office to be contacted for further information.
(iv) The Internal Revenue Service will provide the employer with a
copy for the employee of each notice it furnishes to the employer under
this paragraph (g)(5) in addition to the notice furnished to the
employer for his own use. The Internal Revenue Service will also mail a
similar notice to the employee at the address of the employee as shown
on the certificate under review.
(v) The employer shall promptly furnish the employee who filed the
defective certificate, if still in his employ, with a copy of the
written notice of the Internal Revenue Service with respect to the
certificate and may request another withholding exemption certificate
from the employee. The employer shall withhold amounts from the employee
on the basis of the maximum number specified in the written notice
received from the Service.
(vi) If and when the employee does file any new certificate (after
an earlier certificate of the employee was considered to be defective),
the employer shall withhold on the basis of that new certificate
(whenever filed) as currently effective only if the new certificate does
not make a claim of exempt status or of a number of withholding
exemptions which claim is inconsistent with the advice earlier furnished
by the Internal Revenue Service in its written notice to the employer.
If any new certificate does make a claim which is inconsistent with the
advice contained in the Service's written notice to the employer, then
the employer shall disregard the new certificate, shall not submit that
new certificate to the Service, and shall continue to withhold amounts
from the employee on the basis of the maximum number specified in the
written notice received from the Service.
(vii) If the employee makes a claim on any new certificate that is
inconsistent with the advice in the Service's written notice to the
employer, the employee may specify on such new certificate, or by a
written statement attached to that certificate, any circumstances of the
employee which have changed since the date of the Service's earlier
written notice, or any other circumstances or reasons, as justification
or support for the claims made by the employee on the new certificate.
The employee may then submit that new certificate and written statement
either to (A) the Internal Revenue Service office specified in the
notice earlier furnished to the employer under this paragraph (g)(5), or
to (B) the employer, who must then
[[Page 225]]
submit a copy of that new certificate and the employee's written
statement (if any) to the Internal Revenue Service office specified in
the notice earlier furnished to the employer. The employer shall
continue to disregard that new certificate and shall continue to
withhold amounts from the employee on the basis of the maximum number
specified in the written notice received from the Service unless and
until the Internal Revenue Service by written notice (under paragraph
(g)(5)(iii) of this section) advises the employer to withhold on the
basis of that new certificate and revokes its earlier written notice.
(6) Definition of employer. For purposes of this paragraph (g), the
term ``employer'' includes any individual authorized by the employer to
receive withholding exemption certificates, to make withholding
computations, or to make payroll distributions.
(68A Stat. 731 (26 U.S.C. 6001); 68A Stat. 732 (26 U.S.C. 6011); 68A
Stat. 917 (26 U.S.C. 7805))
[T.D. 6516, 25 FR 13105, Dec. 20, 1960, as amended by T.D. 6654, 28 FR
5252, May 28, 1963; T.D. 7048, 35 FR 10291, June 24, 1970; T.D. 7065, 35
FR 16539, Oct. 23, 1970; T.D. 7577, 43 FR 59359, Dec. 20, 1978; T.D.
7598, 44 FR 14552, Mar. 13, 1979; T.D. 7682, 45 FR 15526, Mar. 11, 1980;
T.D. 7772, 46 FR 17548, Mar. 19, 1981; T.D. 7803, 47 FR 3547, Jan. 26,
1982; T.D. 7915, 48 FR 44073, Sept. 27, 1983; T.D. 8164, 52 FR 45633,
Dec. 1, 1987]