On December 5, 2019, the IRS issued a redesigned Form W-4 (Employee’s Withholding Certificate). Form W-4 is used by employers to correctly withhold federal income tax from employee paychecks as determined by the employee. Prior to the 2020 form, the amount withheld was based on allowances. The biggest change to the long-used 1987 form is that the new form no longer uses allowances to determine withholding.
While all employees must fill out Form W-4 at the time of their employment for federal income tax withholding, the IRS is not requiring all employees to fill out a new 2020 Form W-4. The new form was designed to work with prior year versions of the form. Therefore, current employees need not fill out a new form unless they need to revise or update their federal withholding due to changes in their personal or tax situation. However, all new hires will use 2020 Form W-4.
The 2020 form was designed to make it easier than previously to fill out. The 2020 form no longer asks about allowances so gone are the days of wondering whether one should claim ‘0’, ‘1’, or something else. Elimination of allowances aligns with the changes of the 2017 Tax Cuts and Jobs Act. The 2020 W-4 Form, available from the IRS, is four pages long and can be downloaded and printed for filling out or filled out online and printed. Page 1 is the form itself and is the only page due to the employer. Page 2-4 are informational and include worksheets and tables.
Here are some tips to help with filling out the form (Page 1):
Step 1. Enter Personal Information. Be sure to check the correct filing status.
Step 2. Multiple Jobs or Spouse Works. Skip this section if nothing applies. If one or more jobs are held by the employee OR if the employee has a spouse working and files ‘married and filing jointly’ consideration needs to be made based upon a, b, or c.
(a) Use the IRS’s tax withholding estimator. See Page 2 for when to use the estimator. To use the estimator, you will need to gather some documents (given on the website) in order to provide the most accurate information. (The estimator is only as good as the information provided.)
(b) Use the Multiple Jobs Worksheet on Page 3. Enter results in Step 4(c).
(c) If there are only two jobs with similar pay, check the box. Do the same for other job Form W-4.
Step 3. Claim Dependents. Include qualifying dependent children (under age 17) and other dependents (qualifying older children or elderly parents/relatives). Be sure to read Step 3 instructions on Page 2 to meet qualification requirements.
Step 4. Other Adjustments. This section only applies if one desires
(a) withholding tax for non-job income:
(b) do not expect to claim the standard income tax deduction (vast majority of people claim the standard deduction);
(c) withholding additional tax for each pay period for amounts from Multiple Jobs Worksheet, line 4, or for any other reason. Entering an amount here will reduce paycheck amounts and will either increase tax refunds or reduce income tax due (Form 1040).
Step 5. Sign Here. Sign, date, and submit to employer. Employees may want to keep a copy for themselves. This is a legal tax document.