The New 2020 W4 Form Is Here


The New 2020 W4 Form Is Here

There has been a lot of discussion about the release of a new W4 – well, it’s here. The new 2020 W4 was released on December 5, 2019, and there are several changes.

Why a New 2020 W4?

Use of the old W4, resulted in some tax time surprises with passage the Tax Cuts and Jobs Act of 2017. The goal of withholding is to pay enough in taxes each pay period, so that your year-end tax bill is $0, or as close to it as possible. Unfortunately, during the 2019 tax season, many people found that their return was significantly lower than expected, or worse – they owed taxes.

The new 2020 W4 is designed make it easier to understanding how much should be withheld from each check, allow for self-employment income, and account for multiple jobs.

By way of example: if you have two jobs that each pay $25,000 a year – and you are taxed at that level at each job – generally, come tax time, you will find you have not had enough taxes withheld for your $50,000 income level.

As an extra, added bonus – for those of us whose eyes glazed over when we heard the word ‘allowances’, never fear. It has been banished from the new form. Employees are asked to provide withholding amounts in actual dollars.

The new 2020 W4 still has worksheets to assist employees in figuring out how much to withhold. However, the IRS has also released an online Withholding Estimator to help the process along.

…as always, we recommend referring employees to their tax preparer for assistance with their individual tax situation

What Do I Need to Know

  • the withholding tables used for both the 2020 form and prior forms is the same, you will not need pre and post payroll systems
  • anyone hired January 1st or later will need to complete the new 2020 W4 form
  • there is no need for current employees to complete a new W4 unless
    • they claimed exempt on the 2019 W4 form
    • they wish to change their withholding level
  • as always, we recommend referring employees to their tax preparer for assistance with their individual tax situation

Action Plan

  • contact your payroll processor to confirm they are ready to accommodate the new form
  • if you process payroll in house, ensure your systems have been updated (you might consider outsourcing as a good option to make sure changes such as this are properly handled)
  • make sure the new form is included in all new hire paperwork and packages
  • include the form in your year-end tax package
  • have all employees who claimed ‘exempt’ on the 2019 W4, complete a new form
  • get rid of the old W4 form (going forward, you must use only the new form)
  • inform managers and other supervisory personnel to use the new form only

Happy New Year!

The preceding is provided for general informational purposes only, and not intended to constitute legal advice.

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