THE IRS HAS REVISED FORM W-4 EFFECTIVE JANUARY 1, 2020
The 2020 Form W-4, Employee’s Withholding Certificate, is very different from previous versions. This is due to the federal tax law changes that took place in 2018. The Internal Revenue Service (IRS) is not requiring all employees to complete the revised form and has designed the withholding tables so that they will work with both the new and prior-year forms. However, certain employees will be required to use the new form: those hired in 2020 and anyone who makes withholding changes during 2020.
Before completing the 2020 Form W-4, please read the instructions that are included with the form. You must complete Steps 1 and 5. Steps 2, 3, and 4 are optional, but completing them will help ensure that your federal income tax withholding will more accurately match your tax liability. Step 1 is for your personal information; Step 2 is for households with multiple jobs; Step 3 is used to claim tax credits for dependents; Step 4 is for other adjustments (additional income such as interest and dividends, itemized deductions that exceed the standard deduction, and extra tax you want withheld); and Step 5 is where you sign the form.
The IRS takes your privacy seriously and suggests that, if you are worried about reporting income from multiple jobs in Step 2 or other income in Step 4(a), you check the box in Step 2(c) or enter an additional withholding amount in Step 4(c). To determine the additional withholding amount, you can use the withholding estimator.
What Changes are made by the IRS on this redesigned Form W-4?
Due to the Tax Cuts and Jobs Act of 2017, individual taxpayers can no longer claim the personal or dependency exemptions. The 2020 Form W-4 does not have the withholding allowances for computing withholding amounts. Optional adjustments such as other income or deductions other than the basic standard deduction can be included.
Do current employees need to complete a new form?
No, the employees’ most currently submitted Form W-4 prior to 2020 will remain to be used for the withholding computation which includes withholding allowances.
When will an employee be required to use the new form?
New employees hired January 1, 2020 or later
Current employees that make an adjustment to their W-4 after January 1, 2020
Why do I need to account for multiple jobs (step2)?
Tax rates increase as income rises, and only one standard deduction can be claimed on each tax return, regardless of the number of jobs in the household. Therefore, if you have more than one job at a time or are married filing jointly and both you and your spouse work, more money should be withheld from the combined pay for all the jobs than would be withheld if each job was considered by itself.
Who can help me complete the form?
Employees should seek advice from a tax professional; we cannot give tax or legal advice.
EMPLOYEES CAN ALSO USE THE IRS’S TAX WITHHOLDING ESTIMATOR (WWW.IRS.GOV/W4APP)
Where can I find additional information?
The IRS has also published Frequently Asked Questions that you may find helpful as you complete the form (https://www.irs.gov/newsroom/faqs-on-the-draft-2020-form-w-4).