I am the bookkeeper at a new company. I have not done payroll before but am now required to do so. One of the employees that came with the company was previously paid by check, less only the previous company's deductions (7.25%). He has completed a W2 with one dependent and claimed 'Exempt'. Is it legal to set him up as an employee with one dependent and exempt?

Thanks!

Correction - he completed a W4, not a W2!!

I am going to be rude, I am sure someone here will answer that issue. Where are they going to send you to learn payroll if you have never done it before, Do they use a service that does the actual work ?

There are so many errors and mistakes someone untrained can make it is scary a company would have a untrained person trying to pay their employees

Well thanks for the answer Mr. Christianity, keep spreading that good cheer.

I know this is way old, but I'm going to jump in on this.

I would have to echo what "Mr. Christianity" said. I would have said something along the same lines, and have said that to people before. You should not be in a job being responsible for other people's paychecks and taxes if you are not trained in the subject. If it were my checks, I would find it scary as well. I'm sorry, but you have to take that seriously. It is not my attempt to be rude, but it is the truth. Do you realize each person is responsible for their own taxes being correct, but YOU are doing them for them? The company can screw up, but each person is responsible. Though the company is responsible for deducting and paying them.

This is not really directed at you -- the company should not have done it. However, if you knew this is what the job entailed and knew you were not trained, you also should have explained that.

I won't judge you taking the job and maybe you didn't even know. (And maybe you desperately needed a job.) But you need to actually learn what you are doing, and asking a question here and there on a forum probably isn't going to get you there. Like take a course in it or something. The company hired you - make them pay for it.

Yes, it's legal to set him up with one dependent and exempt. (Though I don't get the point of mixing those two.) However, I believe you have to report any "exempt" status to the IRS. I believe if you look that W-4 over it might say that. If it doesn't say it there, it does say it in the Circular E. If you can't find it, call the IRS and get one. It gives all the information about the rates, exemptions, due dates, etc, etc. That's your first resource for information you need. Their web site is another resource. Don't be afraid to call them if you have to - they really don't bite.

I don't understand what you are talking about with this guy coming to the company versus some "previous" employer?? A previous employer is no concern of yours. And I hope you meant 7.65%? That's FICA. If he truly has some good reason for being exempt (and he might), that doesn't necessarily mean he's exempt from state or local taxes.

If it were me I'd flat out ask why he thinks he is exempt. I explain that I am responsible for reporting this type of thing to the IRS and perhaps it would help if they would explain it to me. If they just say it's legit and won't tell you anything, then let it go and report it. But also ask them about state and local taxes. Since I don't know your locality, you may have to call the state/city tax offices and ask them about that issue.

As a side note, the one and only time anyone tried to claim exempt when I was doing payroll was some guy that had this weird thing about being exempt for one half of the year and not having taxes come out, and then claiming extra exemptions the second half of the year and having too much come out. He did tell me it wasn't my business & got mad that I asked. However, that's not something you're supposed to be doing and I was responsible for payroll. Since he was going to claim extra exemptions the second half of the year, I just let it go. Very strange.