BY JEANNINE DUBIAC, FPC
Employers be aware. The IRS has updated the 2020 Form W-4 Employee’s Withholding Certificate.
This new version of the W-4 form is required for all new hires in 2020 and for employees who want to make a change to their withholding for 2020. Employees hired prior to Jan. 1 are not required to submit a new form.
This new 2020 W-4 form will look different! There is no longer the ability to select withholding allowances to account for additional income, deductions and tax credits. The new form include lines where employees can enter those amounts directly that will be used in calculating the withholding amount.
The IRS is not requiring all employees to complete the new W-4. Only those employees that are new hires or those that would like to make changes to their withholdings will be required to use the new revised form. The IRS has designed the tax tables to work with both the new form and the prior year versions of the form.
Is your withholding correct for your personal situation? The IRS does not require all employees to complete the new revised W-4 form, however they are recommending that all individuals perform a “paycheck checkup” to see if they need to make adjustments to their withholding.
To conduct the checkup, individuals can use the IRS’s Tax Withholding Estimator (www.irs.gov/W4App). To effectively use the estimator, it is helpful to have a copy of a recent pay stub and tax return. Please note: if the new 2020 W-4 form is not provided, withholding will continue based on your previously submitted form.
What to expect when completing the new form:
The form W-4 has five steps, however only steps 1 and 5 are required. The form can be found at https://www.irs.gov/pub/irs-pdf/fw4.pdf
Step 1. For an employee’s personal information. Name, address, social security number and filing status.
Step 2. For an employee or households who have multiple jobs.
Step 3. Provides instructions to determine the amount of the child tax credit and the credit for other dependents that you may be able to claim when you file your tax return.
Step 4. Is for other adjustments such as interest and dividends, deductions other than the standard deduction to reduce withholding and any additional tax the employee wants withheld for each pay period.
Step 5. The employee signs and dates the form.
Compete steps 2-4 only if they apply to your situation, doing so will make your withholding more accurately match your tax liability.
The IRS also created a new publication – Publication 15-T, Federal Income Tax Withholding Methods www.irs.gov/pub/irs-pdf/p15t.pdf– to explain how withholding is calculated with the prior year and 2020 Forms W-4.
Because the 2020 Form W-4, Employee’s Withholding Certificate, is very different from previous versions, communicating the changes to employees will be challenging. Employers should understand that they need to be careful not to give tax or legal advice. Employees should seek the advice of their tax advisor or accountant if they have questions on how to complete the form.