Employer withholding compliance is a crucial issue to the IRS. In order to ensure that companies remain compliant, the following regulations are in place at the federal level.

The IRS advised employers they are not required to routinely submit to the IRS Forms W-4, Employee's Withholding Allowance Certificate, when employees claim complete exemption from withholding.  However, the IRS may require employers to submit Forms W-4 in certain circumstances. (IR 2005-45, 04/13/2005, IRC Sec(s). 3402)