You may have heard the IRS has launched a new W-4 form for 2020. The W-4 Form, also known as the Employee’s Withholding Certificate, has undergone a major overhaul that will impact all NEW employees and any current employees needing to make payroll withholding changes.
Current employees are NOT required to submit the new
Form W-4 form just because the form has changed if they have a prior W-4 form
on file. An employee’s withholding will
continue based on a valid prior W-4 form previously submitted by the employee
to the employer.
The form has an entirely new look and several new input
fields replacing the familiar “withholding allowances” box. In some cases the form can be completed by
simply filling in the information in ‘Step 1’ and ‘Step 5’, which is all that
is required; however, in many (probably most) cases employees will need to
provide details from their prior year’s tax return. If workers fail to complete this form properly
they may likely end up with a surprise tax amount due at year-end.
- There is no longer an
‘Exempt’ from withholding checkbox. To claim exemption from withholding you
must certify that you meet the conditions of exemptionsby
writing “Exempt” on Form W-4 in the space
below Step 4(c).
- There is No Withholding
Allowance (# of allowances) box on the new form.
- There is a new Head of
Household filing status option on the new form.
- There is an option to use
an IRS website (www.irs.gov/W4App) estimator that gives you
the maximum accuracy and privacy in computing the correct amount of withholding
for multiple jobs, a spouse who also works, special dependent situations, or
other income or deductions.
- A simple checkbox option
[Step 2 – C] is available when an employee has two jobs with roughly the same
earnings, which results in the standard deduction and tax brackets being cut in
half for each job for purposes of computation of withholding. The checkbox must be selected on the new W-4
form for both employers.
- Lines 3, 4(a) and 4(b) are all ‘annual’ (Full Year) amounts, while
line 4(c) is a ‘pay-period’ (Per Pay Check) amount. This is likely a
source of significant confusion for both employees and employers.