When an employee submits a W-4 form with incorrect information, what might occur?

When an employee submits a W-4 form with incorrect information, one possible outcome is that the IRS may issue a Lock-in Letter. This letter is sent in situations where the information provided by the employee is inconsistent with IRS records, particularly regarding withholding allowances claimed. A Lock-in Letter requires the employer to withhold taxes at a certain amount, effectively overriding the employee's specified allowances until the issue is resolved. This helps ensure that the correct amount of federal income tax is withheld from the employee's paycheck, minimizing the risk of under-withholding and potential tax liabilities for both the employee and the employer.

While other answers touch on potential consequences of incorrect W-4 information, they do not specifically address the regulatory action that may arise from discrepancies noted by the IRS, which is particularly pertinent in this context. For example, increased tax returns may relate to tax filings rather than withholding issues, and a refund typically pertains to over-withholding rather than problems caused by incorrect W-4 submission. Thus, receiving a Lock-in Letter is a direct and regulatory consequence resulting from incorrect W-4 information.