Changes for 2020 Form W-4
By Jill H. Robertson
When the Tax Cuts and Jobs Act was signed into law back in December 2017, changes to the Form W-4 became a matter of “when” not if. After much delay, the IRS is expected to be releasing an updated version of Form W-4 for 2020 before the end of the year, which will have the biggest changes to the form since it debuted in 1943. The new design is to aid in the reduction of complexity and increase transparency and accuracy of the withholding system. It will have more straightforward questions to make it simpler to determine more accurate withholding.
Allowances will no longer be used on the redesigned Form W-4. In the past, the value of a withholding allowance was tied to the number of personal exemptions being claimed on the taxpayer’s tax return. This is no longer applicable due to the changes in the tax law, as you can no longer claim personal or dependent exemptions.
The new form is divided into 5 steps. All employees will be required to complete Step 1, entering personal information and Step 5, where you sign the form. If Steps 2 through 4 apply to you, complete those sections and your withholding will be more accurate to your tax liability. If you do not complete Steps 2 through 4, your withholding will be based on your filing status’s standard deduction and tax rates with no additional adjustments.
Employees that have submitted a Form W-4 in prior years before 2020 are not required to submit a new W-4 as employers will continue to calculate withholding based on the most recently provided W-4 from the employee. Even though you do not have to update your W-4, if you have not done so since the new tax law passed, this would be a great opportunity to do so. The IRS provides a copy of the current version of this form on its website if you wish to complete a new W-4 form for your employer.
In 2020, all employers are required to use the new Form W-4 for all new employees and for any withholding changes for employees hired prior to 2020.
If an employee has a complex tax situation, the IRS released an improved Tax Withholding Estimator that can be used to provide maximum accuracy of an employee’s tax liability. If you wish to use the Tax Withholding Estimator, please visit the following website and follow the steps. https://www.irs.gov/individuals/tax-withholding-estimator.
If you have any questions on filling out the Form W-4, please reach out to your trusted tax advisor.
Jill H. Robertson Staff Accountant CAS