At the end of 2019, the Internal Revenue Service released a final Form W-4 for use in 2020. Employees who have submitted Form W-4 in any year before 2020 are not required to submit a new form merely because of the redesign. Employers should continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.
Employees complete the Form W-4 so that their employers can withhold the correct amount of federal tax from their paycheck. A significant change for the 2020 form is that it does not have withholding allowances because employees may no longer claim personal exemptions or dependency exemptions. Previously, the value of a withholding allowance was tied to the amount of the personal exemption.
"While employers cannot require existing employees to complete the new Form W-4 for 2020, any changes to federal tax withholding must be made using the new Form W-4," says Jill Grasso, CheckWriters Tax Manager.
"In addition, employers can direct their employees to the IRS Estimator, which can be found on the IRS website. This convenient tool provides a more accurate tax withholding projection based on family income for joint tax filers."
The new form is divided into five steps and employees will provide information for the steps that apply to them (steps 2-4 may not).
Step 1: Enter personal information (including marital status). Step 2: Account for multiple jobs (employee), or whether the employee’s spouse works. This step is completed if the employee holds more than one job at a time or is married filing jointly and their spouse also works. The correct amount of withholding depends on income earned from all jobs. Steps 3 and 4: Claim dependents and other adjustments (specifically, other income that is not from jobs, deductions, and extra withholding). Steps 3 – 4 are completed on Form W-4 for only one job, and these steps are left blank for the other jobs. Withholding is most accurate if an employee completes Steps 3 – 4(b) on the Form W-4 for the highest paying job. Step 5: Employee signature and date.