[CA] If an employee files their W4 and/or DE4 as "exempt" from tax, do I have an obligation to report to IRS?
We hired a new employee 2 months ago and he filed "exempt" on both fed and state. He filled them out in my office, and he said something along the lines of "I don't like them taking anything out of my check, how do I claim exempt?" I just told him to read the form closer and the instructions are in there.
I'm pretty certain he does not legally qualify for exempt status. (Especially since today I just received a notice from the franchise tax board that he owes about $1500 from 2022, and we have to start garnishing 25% of his paycheck).
Now another guy in our shop just resubmitted his W4 last week, claiming exempt. I reached out to him just to confirm the details because he submitted it directly through ADP. He mentioned that he saw something on tiktok about how you don't actually have to pay taxes. Sigh. He also mentioned he should probably talk to a CPA. All I said was "I HIGHLY advise discussing this with a CPA." I withheld my urge to say more.
Now, I honestly don't care how anyone else handles their taxes. Thats his financial business and his consequences with the IRS. Not my circus. (Except for the fact that it WILL give ME more work to do in the future when the tax board starts coming after them for all their unpaid taxes).
However, our controller mentioned that she thinks I'm supposed to do some sort of filing with the IRS when an employee claims exempt. Is there a formal process I need to comply with?
If this starts being a trend that runs through our employees, I just want to make sure I'm doing what I'm legally required to do, if anything at all. I'll probably reach out to our CPA as well, but I'm curious who else has seen this run through their departments, and what your experience is.