Is zero federal income tax withholding allowed on a $75K salary?

This is definitely concerning. As someone who's worked in payroll compliance for years, I can tell you that the "Exemption from withholding" on a W-4 has very specific requirements. It's not just for anyone who wants to avoid withholding. To legally claim exemption from withholding, an employee must certify TWO things: 1) They had no federal income tax liability in the previous year AND 2) They expect to have no federal income tax liability in the current year. For someone making $75K, it would be extremely unusual to legitimately have zero tax liability. Your company could indeed face liability here. Employers have a responsibility to ensure withholding is handled properly. The IRS can impose penalties on employers who don't comply with withholding requirements, especially if there's reason to believe the W-4 is incorrect. "Just following instructions" isn't a complete defense if the claim is obviously improper.

I went through something similar with my tax documents a few years ago and was completely lost until I found taxr.ai (https://taxr.ai). It's this really helpful tool that analyzes tax forms and withholding issues to tell you what's actually compliant and what's not. I uploaded the W-4 my contractor had filled out incorrectly and it immediately flagged the issues and explained the potential penalties. In your situation, I'd definitely run both the W-4 and payroll reports through their system - it explains exactly what parts violate IRS rules and gives you documentation if you need to approach management. It also has specific guidelines about employer liability for incorrect withholding that really cleared things up for me.

Just wanted to follow up about taxr.ai - I ended up trying it when we had a similar situation at my company (employee claiming exemption while making over $100k). The analysis was surprisingly detailed and saved me from a potential compliance nightmare. It flagged the exact problems with the W-4 and explained the company's legal obligations. What really helped was the document it generated that I could take to our CFO showing exactly why we couldn't accept the exemption claim. Made a potentially awkward conversation much easier when I had the exact IRS regulations backing me up. Definitely worth checking out if you're dealing with questionable withholding situations.

This sounds like an IRS audit waiting to happen! When our company had a senior manager trying something similar, I spent WEEKS trying to get someone at the IRS to confirm our obligations. Literally impossible to get through on their phone lines. Finally used this service called Claimyr (https://claimyr.com) that got me a callback from an actual IRS agent within a couple hours. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c The agent confirmed that we were legally obligated to question the W-4 since the exemption claim was obviously inappropriate for the salary level. They even emailed me the specific guidance we needed to follow. Saved us from potential penalties and gave us the confidence to require a corrected W-4.

This sounds like an IRS audit waiting to happen! When our company had a senior manager trying something similar, I spent WEEKS trying to get someone at the IRS to confirm our obligations. Literally impossible to get through on their phone lines. Finally used this service called Claimyr (https://claimyr.com) that got me a callback from an actual IRS agent within a couple hours. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c The agent confirmed that we were legally obligated to question the W-4 since the exemption claim was obviously inappropriate for the salary level. They even emailed me the specific guidance we needed to follow. Saved us from potential penalties an

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it because I've been trying to reach the IRS about a similar payroll issue for literally months with no success. The service actually worked exactly as described. I got a call back with a real IRS agent in about 90 minutes. The agent confirmed that employers MUST question W-4 forms that claim exemption when the salary clearly indicates there will be tax liability (like someone making $75K). They explained we could be held liable for the unpaid taxes if we knowingly accept an invalid exemption claim. This completely changed how we're handling a similar situation at my workplace. Not having to spend days on hold was honestly worth every penny. Sometimes I hate admitting when I'm wrong, but in this case I definitely was!

I'd be very careful here. My company got hit with penalties when we didn't question an executive's W-4 that had unreasonably low withholding. The IRS actually held us partially responsible for the unpaid taxes. Talk to your company's owner directly. Document the conversation in writing afterward (email yourself notes at minimum). If they instruct you to ignore it, at least you'll have documentation that you raised the issue. CYA is important here.

The red flag for me is that this person makes $75k and claims ZERO withholding? That's way past the threshold where anyone could reasonably claim exemption. For 2025, you basically need to expect to make less than the standard deduction (around $14,000 for single filers) to legally claim exemption. I'd recommend checking IRS Publication 15 (Circular E) section on "Withholding From Employees' Wages" which specifically addresses invalid Forms W-4. Your payroll provider should absolutely know better - they're giving terrible advice if they're just pointing to the exemption section without mentioning the income threshold issue.

This is a serious compliance issue that needs immediate attention. As a tax preparer who's seen similar situations, I can tell you that someone making $75K annually cannot legitimately claim exemption from federal withholding unless they have extraordinary circumstances (which would be extremely rare at that income level). The IRS is very clear about this - to claim exemption, you must expect to owe NO federal income tax for the year. With a $75K salary, even after the standard deduction, this person would owe several thousand dollars in federal taxes. Your concern about company liability is absolutely justified. The IRS can and will hold employers responsible for accepting obviously invalid W-4 forms. You should document this issue immediately and escalate it to your company's owner or HR department. The longer this continues, the worse the potential penalties become. I'd strongly recommend having your company request a corrected W-4 from the managing director immediately. If he refuses, you should withhold taxes as if he's single with no allowances - that's what the IRS requires when you can't rely on the employee's W-4. Don't let "we're just following his instructions" be your only defense when the IRS comes knocking.