New Form W-4

ALERT: IRS issues new Form W-4

December 20, 2019

The IRS released new withholding tables for 2018 and 2019, but Form W-4 remained largely unchanged until now.

Earlier this month, the IRS released a new Form W-4 to be used starting January 1, 2020.

What this means for employers

  • All new employees hired on or after January 1, 2020 must use the new form.
  • Existing employees are not required to submit a new form, but may do so if they choose.
  • Any withholding change requests submitted on or after January 1, 2020 must use the new form.
  • The IRS Tax Withholding Estimator can be utilized for employees to perform a “paycheck checkup.”

What this means for employees

Even if an individual’s tax situation has not changed, the IRS recommends performing a “paycheck checkup” to see if adjustments are needed to current amounts withheld. The IRS Tax Withholding Estimator is available to conduct this checkup and should be updated to account for the 2020 tax tables in early January. The Estimator tool works best if the employee has a copy of his/her most recent pay stub and tax return.

Background

Prior to the Tax Cuts and Jobs Act (TCJA), most withholding allowances were based on personal exemptions (i.e., one each for the employee, any spouse and dependents). Beginning in 2018, the TCJA made significant changes to tax rates, deductions, tax credits and personal exemptions, which changed to zero. The IRS released new withholding tables for 2018 and 2019, but Form W-4 remained largely unchanged until now.

New Form

The 2020 Form W-4 is presented on a single, full page, followed by instructions, worksheets and tables. In place of withholding allowances, the new W-4 includes a process for declaring additional income, so employees can adjust their withholding with varying levels of accuracy, privacy and ease of use.

This process is outlined in the following five steps:

  1. Enter personal information (Required)
  2. Indicate multiple jobs or if spouse works (Optional)
  3. Claim dependents (Optional)
  4. Make other adjustments including for (a) interest, dividends and retirement income, (b) deductions other than the standard deduction, and/or (c) any extra tax withholding per pay period (Optional)
  5. Sign the form (Required)

If Steps 2, 3 or 4 apply to employees and they choose to provide that information, their withholding will more accurately match their tax liability. However, employees can adjust their withholding in Step 4(c) without sharing additional information.

Helpful links:

2020 W-4 Form

Income Tax Withholding Assistant for Employees

Tax Withholding Estimator

Questions?

If you'd like more information, contact Sonia Phillips using the information below.

Sonia Phillips

Payroll Senior Manager
Outsourcing Services

Sonia and her team handle payroll processing, reporting and tax filings for multi-state and multi-site companies. An AGH employee since 1991, Sonia has expertise in both technology and employee benefits consulting as well as payroll. She has helped develop a variety of operational, management and executive information systems projects within and outside the employee benefits industry.

Before joining the outsourcing services group, Sonia managed the technology infrastructure and plan processing systems for AGH’s employee benefits services division. She worked with internal and external clients to accurately assess their information system needs and managed the projects designed to satisfy these needs, as well as any necessary integration.

Information in this document has been obtained by Allen, Gibbs & Houlik, L.C. from sources believed to be reliable. However, AGH does not guarantee the accuracy nor completeness of any information. This communication does not and is not intended to provide legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly, AGH assumes no liability whatsoever in connection with its use. Nothing in this communication can be used to avoid penalties that may be imposed by a governmental taxing authority or agency.

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