Managing Staff Member's Additional Withholding

In some cases, employees with a housing allowance choose to add an additional withholding amount in Box 4c on their W-4 form to help account for self-employment taxes. While this can assist in meeting tax obligations, it’s important to understand how this impacts all payments, including bonuses or special one-time payments.


How Box 4c Withholding Works for Employees with Housing Allowances

When an employee with a housing allowance opts for an additional withholding amount in Box 4c:

  • The specified amount is applied to every payment made to that employee.
  • This includes regular payroll checks as well as bonuses or special payments, unless the W-4 is updated.

For example, if an employee’s W-4 specifies an additional $200 in Box 4c, that $200 will be withheld from all payments, including separate bonuses, unless explicitly adjusted.


Recommendation for Bonus Payments

To avoid unintended over-withholding on bonuses or special payments for employees with Box 4c overrides, we recommend:

  1. Including Bonus Payments on Regular Payroll Checks
  • By combining bonuses with regular payroll, the additional withholding will apply only once during the pay period.
  • This helps prevent excessive withholding and streamlines payroll processing.
  1. Processing Separate Payments Carefully
  • If a bonus or special payment must be issued separately, understand that the additional withholding will still apply unless the W-4 is updated.

Steps to Ensure Accuracy

When submitting a payroll change form for a bonus or special payment:

  • Ask the employee to review their W-4 to confirm if Box 4c includes additional withholding.
  • Choose the appropriate payment method based on whether the additional withholding should apply.
  • If the employee wishes to exclude the additional withholding for a specific payment, they must update their W-4 in workforce before processing.

Key Takeaways

  • Additional withholding in Box 4c applies universally to all payments for employees with housing allowances.
  • To avoid over-withholding on bonuses, include them with regular payroll checks when possible.
  • Always verify the employee’s preferences and W-4 details before processing one-time payments.

For further assistance or questions, feel free to reach out to our support team.

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