Mastering the New W-4

Here is the new W-4 for you to download. https://www.irs.gov/pub/irs-pdf/fw4.pdf

Points to consider on the new W-4 for 2020 for employees:

  • Current employees do not have to complete a new form
  • Employers continue to withhold based on the information from the most recent W-2 for all current employees
  • New hires as of 1/1/20 will begin using the new form
  • Allowances are no longer used
  • You cannot claim personal or dependent exemptions
  • The only two steps required on the new form are:
    • Step 1 – Personal information and Step 5 – where you sign
    • What if I only do Step 1 and sign the form? How much taxes will be taken out? Your withholding will be based on the standard deduction and tax rate for your income with no other adjustments.
  • Steps 2, 3 & 4 are optional.
    • 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 if you make money from sources that are not taxed such as rental income).
  • Can I increase or decrease my withholding amounts? Yes, you can by filling in some of the steps listed above (Steps 2-4).
  • I depend on my refund every year. What do I have to do to make sure I get it? Enter an additional amount on line 4c that you want your employer to withhold.

Points to consider on the new W-4 for 2020 for employers:

  • You don’t necessarily need any new software for W-4 forms submitted prior to 2020.
    • The same set of withholding tables will be used for both sets of forms—old and new. You can apply these tables separately to systems for new and old forms.
    • Or, rather than having two separate systems, you may prefer to use a single system based on the redesigned form. To do this, you could enter zero or leave blank information on old forms for the data fields that capture the information on the redesigned form but was not provided to you under the old design. Additional guidance will be provided on the payroll calculations needed based on the data fields on the new and old forms.
  • Beginning 2020, all new hires must complete the new form.
  • Similarly, any employees hired prior to 2020 who wish to adjust their withholding must use the redesigned form.

Full FAQ’s can be found: https://www.irs.gov/newsroom/faqs-on-the-draft-2020-form-w-4

Here is a sample letter outlining the changes that you can send to employees:

https://www.americanpayroll.org/docs/default-source/2019-forms-and-pubs/19m12-2020_form_w-4_letter.pdf

Here is the new W-4 for you to add to your New Hire documents. https://www.irs.gov/pub/irs-pdf/fw4.pdf