If an employee quits before completing a W-4 tax withholding form, can we just pay him as an independent contractor or withhold his final paycheck until he completes his W-4?

An independent contractor relationship is not created simply because an employee works for a short duration and then quits. Your employee cannot be paid as an independent contractor in this situation, and you must prepare his final paycheck within the legally required timeframe even without a completed Form W-4 specifying tax withholding status and allowances.

Even though your employee did not complete the Form W-4, California’s final paycheck deadline laws still will apply. Delaying the final paycheck until the employee completes the Form W-4 may result in a violation of California’s Labor Code Section 202.

Note that if your company policy allows employees to begin accruing vacation from the first day of work, there may be a small amount of vacation wages due as well.

If an employee quits or is terminated before completing a Form W-4, you may follow the guidance from both the Internal Revenue Service and the Employment Development Department for federal and state tax withholding in this situation.

Both agencies specify that if a new employee does not give you a completed Form W-4, withhold tax as if he or she is single with no withholding allowances. Exceptions apply for withholding on wages paid to nonresident aliens.

Contact your tax adviser for further guidance regarding tax withholding concerns.

For more information, read Final Pay Explained in the HR Library.