Court Reminds Employers to Follow "Lock In" Letters for Employees' Income Tax Withholdings

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A United States district court in Pennsylvania recently held that employers are obligated to follow an IRS "lock in"

letter, and, as a result, cannot be held responsible by the employee for following the IRS's instructions.1 This case

serves as a reminder that employers should follow employees' instructions on withholding, but they should

immediately implement any "lock in" letters they receive.

The facts of the case are straightforward. Charles Giles worked for Volvo Trucks North America (VTNA). In April

2004, Mr. Giles submitted an IRS Form W-4 claiming he was exempt from federal tax withholding, as allowed under

Internal Revenue Code (IRC) section 3402(n). He also sent VTNA a demand to stop withholding Social Security taxes

and the legal support for his demand. VTNA attempted to comply with Giles' request by entering 99 allowances into

its payroll system, effectively eliminating any withholding from Giles' pay. VTNA then sent the IRS Giles' IRS Form

W-4.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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