The IRS released the final version of the 2020 Form W-4 (https://www.irs.gov/pub/irs-pdf/fw4.pdf) on December 5th. This long-awaited final version has some major revisions that should make it easier for employees to make accurate income-tax withholding decisions. These changes are intended to simplify the withholding decision and help employees better judge how much they make expect to pay in taxes and/or receive back as a tax refund. This new form should also assist with those employees who have multiple jobs and are two-earner families.
There are five main points of which employers should take notice. Here is what the IRS wants you to know:
- All new employees hired as of Jan. 1, 2020, must complete the new form.
- Current employees are not required to complete a new form but can choose to adjust their withholding based on the new form.
- Any adjustments made after Jan. 1, 2020 must be made using the new form.
- Employers can still compute withholdings based on information from employees’ most recently submitted Form W-4 if employees choose not to adjust their withholdings using the revised form.
- A new Publication 15-T, Federal Income Tax Withholding Methods, to be released in mid-December for use with the new 2020 Form W-4, will include steps employers can take to determine federal withholding.
“The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors,” IRS Commissioner Charles Rettig said. These changes also reflect the tax code changes brought about by the Tax Cuts and Jobs Act which took effect last year.
Where to go for more information
The American Payroll Association (APA) has drafted a sample letter that you can adapt and use to explain the new form to your employees. https://www.americanpayroll.org/docs/default-source/2019-forms-and-pubs/19m12-2020_form_w-4_letter.pdf
The IRS has also updated its IRS Tax Estimator. This can be a helpful tool for all employees, especially if they are facing some changes in jobs, income, marital status or dependents. Help can be found here: https://www.irs.gov/individuals/tax-withholding-estimator
The IRS has more information available to help with the new form and answer some frequently asked questions. https://www.irs.gov/forms-pubs/about-form-w-4