When an employee claims more than 10 withholding allowances on a federal Form W-4 (submitted to the IRS as required) and does not file a separate New York Form IT-2104 because they want the same allowances for both federal and state withholding, must the employer send a copy of Form IT-2104 to the New York State Department of Taxation and Finance?

Plain-English summary

Petitioner Stuart Nathanson asked the Department whether an employer must send a copy of Form IT-2104 (Employee's Withholding Allowance Certificate) to the New York State Department of Taxation and Finance in a specific fact pattern: a corporation received a properly completed federal Form W-4 from an employee claiming more than 10 withholding allowances, and the employer submitted that W-4 to the IRS as required. The employee never completed a separate New York Form IT-2104, because the employee wanted the same number of allowances to apply for both federal and New York State withholding.

The Department explained that Tax Law § 671(a) requires employers to withhold income tax from wages, using a method set by regulation. Under Reg. § 171.4(d)(1), an employer may accept a properly completed federal Form W-4 in lieu of New York Form IT-2104. An employee is only required to complete an IT-2104 under Reg. § 171.4(d)(2) if either (a) no federal W-4 was filed, or (b) the employee wants New York withholding exemptions different from those claimed on the federal W-4 - and in that case the employee is limited to what the IT-2104 actually shows. Separately, Reg. § 171.4(d)(3) addresses what happens if the IRS notifies the employer that a W-4 is defective.

The provision at the center of the question, Reg. § 171.4(d)(4), requires an employer to submit a copy of an employee's IT-2104 to the Department only when three things are all true: an IT-2104 was actually completed and received during the reporting period, the employee is still employed on the last day of that period, and the total allowances claimed on that IT-2104 exceed 14. Because the employee here used only a federal W-4 - properly accepted by the employer under Reg. § 171.4(d)(1) since the employee wanted identical federal and state allowances - and never completed an IT-2104 at all, the Reg. § 171.4(d)(4) submission trigger never comes into play. The Department concluded the employer is not required to obtain an IT-2104 from this employee for submission to the Department.

What this means for you

Small-business employers and payroll administrators

If an employee gives you a properly completed federal Form W-4 and tells you they want the same number of allowances applied to New York withholding, you may rely on that W-4 alone - you do not need to also collect a Form IT-2104 from that employee, and you have nothing to send to the Department regarding that employee's withholding elections, no matter how many allowances are claimed on the W-4 itself. The 14-allowance submission rule in Reg. § 171.4(d)(4) is about IT-2104 forms, not W-4 forms.

Accountants and bookkeepers handling multi-jurisdiction withholding elections

When advising clients on when a completed IT-2104 must be forwarded to New York, remember the trigger is specific: it applies only to an IT-2104 that was actually completed and submitted by a still-employed worker, and only when the allowances claimed on that IT-2104 (not the W-4) exceed 14. A high allowance count on a federal W-4, standing alone, creates no New York filing obligation for the employer as long as the employee wants matching federal and state allowances and never files an IT-2104.

Common questions

Q: Does an employer ever have to send a copy of Form IT-2104 to the New York Department of Taxation and Finance?
A: Yes, but only under Reg. § 171.4(d)(4): when an employee actually completes and gives the employer an IT-2104 during a reporting period, the employee is still employed on the last day of that period, and the total allowances claimed on that IT-2104 exceed 14.

Q: In this ruling, why didn't the employer have to submit anything to the Department?
A: Because the employee never completed an IT-2104 at all - the employee used only a federal Form W-4 and wanted the same allowances for both federal and New York withholding. Since Reg. § 171.4(d)(4) only applies to a completed IT-2104 exceeding 14 allowances, and no IT-2104 existed, the submission requirement was never triggered.

Q: Can an employer accept a federal Form W-4 instead of a New York Form IT-2104?
A: Yes. Reg. § 171.4(d)(1) allows an employer to accept a properly completed federal Form W-4 in lieu of Form IT-2104 for determining New York withholding.

Q: When is an employee actually required to complete a separate Form IT-2104?
A: Under Reg. § 171.4(d)(2), only if the employee has not filed a federal Form W-4, or if the employee wants to claim New York withholding exemptions different from those claimed on the federal W-4. If the employee wants matching allowances, as in this case, no IT-2104 is required.

Q: What if the IRS later tells the employer that an employee's Form W-4 is defective?
A: Reg. § 171.4(d)(3) then caps the employee's New York withholding exemptions at the maximum number specified by the IRS in its notice, less allowances based on federal credit entitlement, plus any additional New York allowances properly claimed on an IT-2104.

Citations and references

• Tax Law § 671(a) - requires employers to deduct and withhold New York income tax from wages, with the withholding method set by regulation
• Reg. § 171.4(d)(1) - an employer may accept a properly completed federal Form W-4 in lieu of New York Form IT-2104
• Reg. § 171.4(d)(2) - an employee must complete Form IT-2104 only if no federal W-4 was filed or the employee wants different New York exemptions than claimed federally
• Reg. § 171.4(d)(3) - if the IRS notifies the employer that a W-4 is defective, New York exemptions are capped at the IRS-specified maximum (less federal credit allowances) plus any additional IT-2104 allowances
• Reg. § 171.4(d)(4) - an employer must submit a completed IT-2104 to the Department only if it was actually received during the reporting period, the employee remains employed on the last day of that period, and the claimed allowances exceed 14

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1994.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a94_6i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-94 (6) I
Income Tax
March 23, 1994

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I931101A

On November 1, 1993, a Petition for Advisory Opinion was received from
Stuart Nathanson, c/o Richard A. Eisner & Company, 575 Madison Avenue, New York,
New York 10022.
The issue raised by Petitioner, Stuart Nathanson, is whether an employer
is required to send a copy of form IT-2104 to the New York State Department of
Taxation and Finance when more than 14 exemptions have been claimed on a W-4,
where the employee wants the New York State personal income tax withholding to
be based on the same number of exemptions as for Federal income tax withholding
purposes.
A corporation received a properly completed Form W-4 with allowances in
excess of 10 from an employee.
The employer submitted the Form W-4 to the
Internal Revenue Service as required. A New York State Form IT-2104 was not
completed by the employee, since the employee wanted the same number of
allowances for both Federal and state purposes.
Section 671(a) of the Tax Law provides that every employer maintaining an
office or transacting business within New York State and making payment of any
wages taxable under Article 22 of the Tax Law shall deduct and withhold income
tax from such wages for each payroll period. The method of determining the
amount to be withheld shall be prescribed by regulations of the Commissioner of
Taxation and Finance.
Section 171.4(d) of the Income Tax Regulations (hereinafter "Regulations")
states:
(1) In determining the proper New York State personal income
tax to be deducted and withheld from an employee's wages, an
employee is entitled to the same number of withholding exemptions as
the number of New York exemptions such employee is allowed pursuant
to section 616 of the Tax Law plus such additional New York State
withholding allowances in accordance with forms and instructions of
the Department of Taxation and Finance (see form IT-2104, Employee's
Withholding Allowance Certificate and Instructions). In lieu of New
York State form IT-2104, an employer may accept a properly completed
Federal form W-4 from an employee.
(2) If an employee has not filed a Federal form W-4, or if an
employee wishes to claim withholding exemptions other than those
claimed for Federal income tax withholding purposes, the employer
must obtain a completed Employee's Withholding Allowance Certificate
(form IT-2104) from the employee. Such employee shall be entitled
to claim only those withholding exemptions allowable on a properly
completed Employee's Withholding Allowance Certificate (form IT­
2104).
TP-9 (9/88)

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TSB-A-94 (6) I
Income Tax
March 23, 1994

(3) If an employer is notified by the Internal Revenue Service
that a Federal form W-4 for an employee is defective, then the
number of exemptions allowable for New York State personal income
tax withholding purposes for that employee shall be limited to the
maximum number of withholding exemptions specified by the Internal
Revenue Service in the written notice received from such service,
less withholding allowances based on entitlement to Federal credits,
plus the number of additional New York State withholding allowances
claimed on a properly completed Employee's Withholding Allowance
Certificate (form IT-2104).
(4) Submission of certain Employee's Withholding Allowance
Certificates (form IT-2104). (i) General Rule. An employer shall
submit, in accordance with subparagraph (ii) of this paragraph, a
copy of any Employee's Withholding Allowance Certificate (form IT­
2104), together with a copy of any written statement received from
the employee in support of the claims made on the certificate, which
is received from the employee during a reporting period, except for
the first submission under clause (ii)(c) of this paragraph, if the
employee is employed by that employer on the last day of the
reporting period and if the total number of withholding exemptions
and allowances claimed on the Employee's Withholding Allowance
Certificate (form IT-2104) exceeds 14.
Accordingly, pursuant to section 171.4(d)(1) of the Regulations, in
determining the proper New York State personal income tax to be deducted and
withheld from an employee's wages, an employer may accept a properly completed
Federal form W-4 from an employee where the employee claims the same number of
withholding exemptions for New York State as the employee claimed for Federal
income tax withholding purposes. If an employer is notified by the Internal
Revenue Service that a Federal form W-4 for an employee is defective, then
pursuant to section 171.4(d)(3) of the Regulations the number of exemptions
allowable for New York State personal income tax withholding purposes for that
employee shall be limited to the maximum number of withholding exemptions
specified by the Internal Revenue Service in the written notice received from
such service, less withholding allowances based on entitlement to Federal
credits, plus the number of additional New York State withholding allowances
claimed on a properly completed Employee's Withholding Allowance Certificate.
Pursuant to section 171.4(d)(2) of the Regulations, an employee must
complete and submit to his or her employer a Employee's Withholding Allowance
Certificate (form IT-2104) if the employee has not filed a Federal form W-4, or
if the employee wishes to claim withholding exemptions for New York State
personal income tax withholding purposes other than those claimed for Federal
income tax withholding purposes. In such case, the employee shall be entitled to
claim for New York State personal income tax withholding purposes, only those
withholding exemptions allowable on a properly completed Employee's Withholding
Allowance Certificate.
Section 171.4(d)(4) of the Regulations provides that where an employee
gives his or her employer a completed Employee's Withholding Allowance
Certificate (form IT-2104) during a reporting period, and the employee is
employed by the employer on the last day of the reporting period and if the total
number of withholding exemptions and allowances claimed on the certificate
exceeds 14, the employer shall submit (in accordance with section 171.4(d)(ii)
of the Regulations) to the Department of Taxation and Finance a copy of such
certificate (form IT-2104), together with a copy of any written statement

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TSB-A-94 (6) I
Income Tax
March 23, 1994

received from the employee in support of the claims made on the certificate,
which is received from the employee during the reporting period.
Herein, a corporation that receives a properly completed form W-4 with
allowances in excess of 10 from an employee who wants the same number of
allowances for both Federal and New York State income tax withholding purposes
is not required to obtain from such employee, for submission to the Department
of Taxation and Finance, a properly completed Employee's Withholding Allowance
Certificate (form IT-2104).

DATED:

March 23, 1994

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.