• Furnish a copy of the lock-in letter to the employee upon receipt (though the first letter in our hands said ten days).
• Impose the new IRS dictated withholding rate 60 days after the date of the letter.
• Fax (the letter actually says mail or fax) a letter on Company Letterhead to the Internal Revenue Service if the employee is no longer employed.
• Continue the lock-in process on gained employees based on the transferred W-4 and lock-in letter from a predecessor.
• Ensure safeguards are in place to prevent employees from increasing their allowances electronically.
• Maintain the withholding amount specified in the lock-in letter. There could be a penalty if the employer fails to honor the lock-in requirement and the employer could be liable for the amount of tax that should have been withheld.
• Remind employees that the notice they received tells them how to contact the IRS if they want to change the withholding status and allowances from single/zero and the information they will need to supply. That information includes: Form W-4 and worksheets; most current pay stub for each job; number of allowances claimed on current Forms W-4; and the social security numbers and dates of birth for any children and proof of any deductions they want to use to claim additional withholding allowances.

There are several chilling points in the most recent IRS article released June 30, 2006. These points are above and beyond the actual regulations issued last year with little fanfare.

• The article specifically references single/zero as the status and allowances that the lock-in letter will have on it, no other option.
• Penalties could be imposed on the employer for at least the amount of tax not collected, additional penalties and interest will, of course, be extra.