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A New Year and a New Form W-4

iconTax Compliance icon5 min read
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Among the changes of the new year, the IRS has decided to redesign Form W-4. Let’s dive into what employers need to know about the new form updated in 2020.

HR veterans and novices alike know that it’s time to get the paperwork ready when their company hires a new employee. One of the first forms a new hire completes is the W-4. Otherwise known as the Employee’s Withholding Allowance Certificate, the W-4 informs the payroll processor how many dependents an employee claims for tax purposes and any additional money they would like to deduct from their paychecks.

Form W-4 ensures proper deductions are being made from an employee’s wages and used for decades. In 2020, an updated form will be used. You can find FAQs about the new Form W-4 here. All employees hired after January 1st, 2020, need to use the new form. Current employees who want to update their deductions must also use the new form.

What’s changed on the new Form W-4?

The IRS changed the old form to make it easier to complete, more accurate, and private. You can watch a webinar discussing the changes here. Let’s dive into the differences:

Filing Status Changes

The filing options in the past were:

  • Single
  • Married
  • Married but withhold at a higher rate

The new form outlines 3 options:

  • Single or married filing separately
  • Married filing jointly
  • Head of household
    W-4 Form 1.PNG

The new categories aim to make it easier for payroll professionals to withhold the correct amount of taxes. 

Concerns for Employee Privacy

The updated Form W-4 is also concerned with protecting the privacy of individuals with multiple jobs. Some employees may not disclose that they work more than one job, but that can pose some problems during tax time. Employers are responsible for withholding the correct amount of payroll tax based on the earnings they pay. If an employee and/or their spouse works multiple jobs, their tax bracket is likely higher, which results in underpaying the IRS. 

The updated form gives workers a better ability to accurately calculate their earnings and withholding amounts they want their employer(s) to use. The new form provides easy access to the Tax Withholding Estimator and Step 2a to accurately calculate taxes based on multiple incomes. 

New Instructions and Worksheets

The updated Form W-4 has four pages of information and worksheets. The first page contains helpful information about filling out the form as well as website links. The second page includes details about the new “Multiple Job Households” section. It informs taxpayers on how to use the new Form W-4 to correctly calculate the amount of tax to be withheld if they or their family have multiple tax deductions.

Page three is the “Multiple Jobs Worksheet.” Designed for personal use, it walks employees through the steps of calculating how much income they estimate they and their spouse (if applicable) will earn if they work multiple jobs. This worksheet allows employees to maintain privacy about their employment information. Once completed, they include the deductions and amount they want to be withheld on the submitted portion of the form. They do not need to provide an explanation. The worksheet also includes a deduction section to correctly estimate their itemized deductions. 

Page four contains tables for taxable wages and salary for each of these categories:

  • Single or married filing separately
  • Married filing jointly
  • Head of household

What if my employee does not complete the new form?

Employees who have to file a W-4 and do not are taxed at the highest rate allowed under the law. Consider it a strong incentive to fill it out promptly. These employees are categorized with the “single standard deduction.”

Are these changes necessary?

When the Tax Cuts and Jobs Act was enacted in 2017, many old withholding tables were inaccurate. The new Form W-4 corrects those inaccuracies with the most up-to-date data regarding withholding amounts. The new form also places a high emphasis on the privacy of employees. The earlier version “asked for much more specific information on other sources of income, such as second jobs, spousal income, non-earned income, etc., which was intended to increase withholding accuracy but which many taxpayers may have felt to be invasive and wouldn’t necessarily want to share with their employer.”

Of course, the IRS wants employees to withhold the correct amount of taxes under the law. When employees deduct the right amount from the paychecks, come tax season, there are no additional taxes to be paid and no refunds to issue. The updated Form W-4 should, in theory, make it easier for employees to correctly calculate their deductions.


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