supdat wrote:How did you leap to that conclusion from the OP?
I thought the context and manner that the question was asked made it fairly obvious that the OP wasn't completing an accurate W-4.
SlipperyPencil wrote:Could I get a citation for "the law has always allowed you to claim as many allowances as you want"? Title 26 Code or Regulations, please.
Laws state what you aren't allowed to do. Can you give a cite that says you can't fill out a W4 in a manner that generates accurate withholding?
A taxpayer shall fill in their W-4 in the manner prescribed under §3402 and its regulations, as AlexCPA has already partially brought up citations for. The old allowance regime was further detailed under §31.3402(m)-1. Perhaps you should be interested in this:
§ 31.6682-1 wrote:(a) Civil penalty. If any individual makes a statement under section 3402 (relating to income tax collected at source) which results in a lesser amount of income tax actually deducted and withheld than is properly allowable under section 3402 and, at the time the statement was made, there was no reasonable basis for the statement, the individual shall pay a penalty of $500 for the statement. There was a reasonable basis for a statement of the number of exemptions an individual claimed on a Form W-4, if the individual properly completed the Form W-4 by taking into account only allowable amounts for items which are allowable and by computing the number of exemptions in accordance with the instructions on the Form W-4. This penalty is in addition to any criminal penalty provided by law. This penalty may be assessed at any time after the statement is made, until the expiration of the applicable statute of limitations.
I won't get into the criminal penalties because I don't expect they are relevant to this situation.
Joan TB wrote:A few years ago, I had a client who made an impressive salary. However, he was in the oil/gas business, and there were deductions coming that we knew would lower his taxable income. (think IDC and depletion, etc.) Anyway, we calculated his W-4 claiming Married-14. His employer sent a copy to the IRS (which was required for claiming allowances >10 back then) and the TP got a letter from the IRS. We provided our calculations and the IRS was OK with it.
You properly calculated and filled in a W-4 for the taxpayer, and because you did so you were able to have the correct withholding for your client while protecting against the penalty. Well done, and I hope your client appreciated your professional work!