Understanding the changes to Form W-4
Following the release of the 2020 Form W-4 by the IRS on December 4, 2019, employers should anticipate assisting employees and addressing inquiries about completing the new form, effective January 1, 2020. The new form affects all newly hired employees after the effective date and any current employees who opt to adjust their federal tax withholding.
The 2020 Form W-4 aims to simplify the process of specifying federal withholding amounts from each paycheck. It introduces straightforward questions and worksheets to help employees calculate withholding more accurately.
Key changes include the elimination of allowances. Instead, the form features numbered steps:
1. Personal Information: Employees provide basic details such as name, address, Social Security number, and filing status.
2. Other Income: Employees must disclose earnings from additional jobs or a spouse’s income to determine precise withholding.
3. Deductions and Adjustments: This optional step allows employees to enter other sources of income, deductions, or extra withholding.
4. Dependents: Revised credits for dependents, including child tax credits and other dependents cared for in the household.
5. Exemption: Employees eligible for exemption must complete specific sections and write “Exempt” under Section 4(c).
The form must be signed and dated to be valid. Employers are advised to prepare for employee questions and ensure compliance with the new requirements promptly.
Starting Jan. 1, 2020, employers will have two W-4s to manage and different processes for each, which could present challenges and additional time for administration. For help, contact your ShindelRock tax professional.