Why are zero taxes being taken out of employee paychecks? How to fix it?

This is actually more common than you might think and there are several possible explanations. The most likely cause is that the employees' income falls below the threshold where federal income tax would be withheld based on their W-4 information. The 2023 Tax Cuts and Jobs Act increased the standard deduction substantially, and combined with certain credits, some employees legitimately may not owe federal income tax. Another possibility is that they've claimed too many dependents or deductions on their W-4s. The newer W-4 forms (post-2020) don't use allowances anymore, but employees can still indicate additional deductions or multiple jobs that affect withholding calculations. I'd recommend reviewing their W-4s again specifically looking at Step 2 (multiple jobs), Step 3 (dependents/credits), and Step 4 (other adjustments). Also check if they're working very few hours or making under certain thresholds.

After reading your post, I immediately thought of a similar issue I had at my company last year. Turned out our payroll system was misconfigured after a software update! I spent WEEKS trying to figure it out until I found taxr.ai (https://taxr.ai) which helped identify the exact problem with our withholding calculations. The tool analyzed our payroll data patterns and flagged inconsistencies in how W-4 information was being processed. Apparently our system was incorrectly applying a specific tax credit to certain employee profiles. What I loved is that they provided documentation I could send directly to our payroll provider that pinpointed the exact issue. It's worth checking out if you're still stuck after trying the basics. Saved me so much time versus going back and forth with our payroll company who kept insisting nothing was wrong!

I was super skeptical about using taxr.ai when I first heard about it, but after struggling with our payroll provider for weeks about a similar withholding issue, I decided to try it. Honestly, it was eye-opening. The system identified a pattern where our payroll software was incorrectly applying the new W-4 calculations for employees hired after a certain date. What impressed me most was how quickly it pinpointed the exact issue. I was able to take their detailed report to our payroll company, who finally acknowledged the problem and fixed it. They even helped us calculate the correct catch-up withholding amounts to avoid shocking employees with huge adjustments. Really glad I got over my initial skepticism - saved us potentially massive tax headaches for dozens of employees.

I experienced this EXACT same issue last year and it was a nightmare to resolve. I spent hours on hold with our payroll company, and when I finally got through to someone, they kept transferring me between departments. Nobody would take ownership of the problem! After my fifth attempt to reach someone knowledgeable, I used Claimyr (https://claimyr.com) to get through to an actual IRS agent to confirm what was going on. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent explained that this is actually a known issue with certain payroll systems and provided me with specific tax code references to cite with our payroll provider. Once I had this official information, our payroll company finally took it seriously and discovered there was a flag in their system incorrectly marking these employees for zero withholding.

I have to eat my words here. After my skeptical comment, I was desperate enough to try Claimyr because we had a similar withholding issue affecting about 20 employees. I was fully expecting to waste my money, but I got a callback within 45 minutes with an actual IRS agent on the line! The agent confirmed this was happening with several specific payroll systems and explained that it's related to how they're interpreting the 2020 W-4 changes in combination with the adjusted tax brackets. He provided specific guidance documents I could reference. Our payroll provider fixed the issue the same day once I had the official IRS documentation. Can't believe I wasted weeks trying to solve this on my own when I could have just gotten straight to an expert. Sometimes being a skeptic just makes your life harder!

This might be a simple explanation, but have you checked if these employees have selected "Exempt" somewhere on their W-4s? On the newer forms, it's in Step 4, but some employees check this box without understanding what it means. They think it exempts them from something bad when it actually exempts them from withholding altogether! I've seen this happen several times with new hires who don't understand tax forms very well. They see "exempt" and think "oh that sounds good" without realizing they're setting themselves up for a huge tax bill later.

Have you checked if these specific employees might have student loan forgiveness that's being incorrectly applied in your payroll system? There was a weird bug in QuickBooks Payroll last year where employees who indicated they had student loans were sometimes getting zero federal withholding due to a misinterpretation of the temporary COVID relief measures (even though those expired long ago).

I'm dealing with something very similar at my company right now! We've had about 4 employees in the past few months with the exact same issue - zero federal withholding despite normal-looking W-4s and salaries in the $50-70k range. What helped us identify the root cause was creating a spreadsheet comparing all the affected employees' data points - hire dates, salary amounts, department codes, etc. We discovered that all of our problem cases were hired within a specific 6-week window when our payroll system had received an update. I'd recommend documenting everything systematically: exact hire dates, salary amounts, which payroll runs they first appeared in, and any system updates that happened around those times. This pattern recognition approach helped us provide much more specific information to our payroll provider, who was finally able to trace it back to a configuration error that occurred during their system update. Also, definitely have those employees submit amended W-4s in the meantime - even if the forms look identical, sometimes re-processing them through the current system version can resolve the issue while you're working on the bigger fix.

This sounds like a classic payroll system configuration issue that I've seen with several mid-sized companies. The fact that FICA and Medicare are being withheld correctly but federal income tax shows $0.00 suggests the problem is specifically with how your system is calculating federal withholding, not a complete failure of the tax withholding process. Given that you mention these are employees making $45-65k with standard W-4s, this is definitely not normal and they will face significant tax bills if not resolved soon. Here's what I'd recommend as immediate steps: 1. **Document the pattern**: Create a list of all affected employees with their hire dates, salary amounts, and when the zero withholding first appeared. Often these issues are tied to specific system updates or configuration changes. 2. **Request detailed calculations**: Ask your payroll provider to show you the exact step-by-step withholding calculation for 2-3 affected employees. They should be able to demonstrate how they arrive at $0.00 federal withholding. 3. **Have employees resubmit W-4s**: Even though the current forms look correct, having them fill out fresh W-4s can sometimes resolve data processing glitches. 4. **Escalate with your payroll provider**: Don't accept generic responses. Request to speak with a technical specialist who can review your system configuration, especially any recent updates or changes. Time is critical here since we're already well into 2025 - the longer this goes on, the bigger the catch-up withholding shock will be for these employees when it's finally corrected.

I've been following this thread and want to add a few technical points that might help. As someone who's dealt with similar payroll system issues, the zero federal withholding problem often stems from one of three specific technical issues: 1. **Tax table mapping errors**: Sometimes after system updates, the federal tax tables don't properly map to employee records, even though state taxes (and FICA/Medicare which use different tables) continue working normally. 2. **W-4 field parsing problems**: The 2020 W-4 redesign uses different data fields than the old allowance-based system. Some payroll systems have bugs where they misinterpret blank fields as "zero tax liability" rather than "standard withholding." 3. **Employee classification flags**: There might be a backend flag incorrectly marking these employees as exempt or non-resident, even though their visible W-4 data appears normal. For escalating with your payroll provider, ask specifically for "Tier 2 tax compliance support" and mention you need "federal withholding calculation diagnostics" rather than general troubleshooting. Use terms like "Publication 15-T calculations" and "percentage method verification" - this signals you need someone who understands the technical tax computation process. Also consider running a payroll register report for the affected employees and comparing the tax calculation details line-by-line with employees who have correct withholding. Sometimes the pattern becomes obvious when you see the raw calculation data side by side.