Did you hear there’s a new W-4 Form for 2020?
On December 5, 2019, the IRS released an updated version of its Form W-4, also known as the “Employee’s Withholding Certificate.”
Employers use IRS Form W-4 to determine each employee’s federal tax withholdings.
The new form is intended to harmonize tax withholding declarations with the Tax Cuts and Jobs Act, which affected individuals for the first time during the last tax filing season.
Employees may complete a new W-4 each year or each time they experience a change in their personal financial situation.
However, the new form does not invalidate prior versions, and employers are not expected to replace W-4 forms from previous years with the 2020 version.
Here’s a few highlights of the new w-4 form for 2020:
- The new form will prompt employees to declare whether they have multiple sources of income (e.g., two jobs or two-earner households).
- New employees who fail to submit a W-4 after 2019 will be treated as single filers with no other adjustments.
- The new form uses a five-step process. Only steps one and five are mandatory.
Employer Action Steps:
Employers should become familiar with the updates to IRS Form W-4 and make it available for all new hires and employees who wish to amend their withholding declarations in 2020.
Please note that employers are not required to update W-4 forms that were completed and filed on or before 2019.
Top Common Questions Regarding the New W-4 Form for 2020
Why redesign Form W-4?
The new design reduces the form’s complexity and increases the transparency and accuracy of the withholding system.
While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.
What happened to withholding allowances?
Allowances are no longer used for the redesigned Form W-4 to increase transparency, simplicity, and accuracy.
In the past, the value of a withholding allowance was tied to the amount of the personal exemption.
Due to changes in law, currently you cannot claim personal exemptions or dependency exemptions.
Are all employees required to submit a new Form W-4?
The simple answer: No.
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 will continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.
Does this mean our software will need two systems – one for forms submitted before 2020 and another for forms submitted after 2019?
Not necessarily.
The same set of withholding tables will be used for both sets of forms.
You can apply these tables separately to systems for new and old forms.
Or, rather than having two separate systems, you may prefer to use a single system based on the redesigned form.
To do this, you could enter zero or leave blank information for old forms for the data fields that capture the information on the redesigned form but was not provided to you under the old design.
Additional guidance will be provided on the payroll calculations needed based on the data fields on the new and old forms.
How do I treat employees hired after 2019 who do not submit a Form W-4?
New employees who fail to submit a Form W-4 after 2019 will be treated as a single filer with no other adjustments.
This means that a single filer’s standard deduction with no other entries will be taken into account in determining withholding.
The IRS and the Treasury Department anticipate issuing guidance consistent with this approach.
Are employees hired after 2019 required to use the redesigned form?
Yes.
Beginning in 2020, all new employees must use the redesigned form.
Similarly, any employees hired prior to 2020 who wish to adjust their withholding must use the redesigned form.
What about employees hired prior to 2020 who want to adjust withholding from their pay dated January 1, 2020, or later?
Employees must use the redesigned form.
May I ask all of my employees hired before 2020 to submit new Forms W-4 using the redesigned version of the form?
Yes.
You may ask, but as part of the request you should explain that:
- They are not required to submit a new Form W-4, and;
- If they do not submit a new Form W-4, withholding will continue based on a valid form previously submitted.
For those employees who furnished forms before 2020 and who do not furnish a new one after 2019, you must continue to withhold based on the forms previously submitted.
You are not permitted to treat employees as failing to furnish Forms W-4 if they don’t furnish a new Form W-4.
Note that special rules apply to Forms W-4 claiming exemption from withholding.
Will there still be an adjustment for nonresident aliens?
Yes.
The IRS will provide instructions in the 2020 Publication 15-T, Federal Income Tax Withholding Methods on the additional amounts that should be added to wages to determine withholding for nonresident aliens.
Additionally, non-resident alien employees should continue to follow the special instructions in Notice 1392 when completing their Forms W-4.
In Closing
It’s important for HR professionals and business owners who manage employee paperwork to be familiar with the new W-4 form.
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