The IRS is finalizing the new 2020 W-4, Employee’s Withholding Certificate. We have some FAQ’s from the IRS.gov site to help you navigate questions as an employee or an employer:
- 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?
No. Employees who 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.
1. My tax situation is simple. Are some questions optional?
Yes. The form is divided into 5 steps. The only two steps required for all employees are Step 1, where you enter personal information like your name and filing status, and Step 5, where you sign the form. If Steps 2 – 4 apply to you, your withholding will more accurately match your tax liability if you complete them.
2. What happens if I only fill out step 1 and then sign the form?
Your withholding will be computed based on your filing status’s standard deduction and tax rates, with no other adjustments.
3. Is there a computer program I can use to help me complete Form W-4?
Yes. To provide maximum accuracy, you are encouraged to use the Tax Withholding Estimator available at www.irs.gov/W4app . Updates and improvements to the estimator are underway that will be compatible with the redesigned Form W-4 in 2020.
1. How do I treat employees hired after 2019 who don’t 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.
2. 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.
3. 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.
14. 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 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.
Please contact Holbrook & Manter with any questions you may have. We would be happy to assist you.