On December 5, the IRS issued the redesigned 2020 Form W-4 (Employee Withholding Certificate). The new form has replaced withholding allowances with a five-step process for determining employee withholding.
Who Should Fill out a New Form W-4?
The IRS is not requiring all employees to fill out a new Form W-4.
Employees who must use the 2020 Form W-4 are:
• Employees with a hire date on or after January 1, 2020
• Employees who make withholding changes beginning in 2020
The IRS encourages all employees to perform a Paycheck Checkup. This process can assist employees in determining the right amount of tax to withhold from their paycheck.
To conduct a paycheck checkup, an employee needs the following:
• Their most recent pay stubs
• Their most recent tax return
The IRS has indicated that a number of taxpayers were under-withheld in 2018 and anticipate the same for 2019 because their Form W-4 was not properly updated where allowances were claimed.
2020 Form W-4 Five Step Process
• The employee enters their personal information and anticipated filing status to determine their standard deduction and the tax rates used to compute withholding
• The employee signs and dates the form under penalties of perjury
• For employees who:
– Have more than one job
– Are married filing jointly with a working spouse
• Provides instructions to determine the amount of:
– Child Tax Credit
– Credit for other dependents the employee is claiming
• The employee enters:
– Other estimated income (e.g. interest and retirement income)
– Deductions other than the standard deduction
– Additional tax the employee wants withheld per pay period
Exemption from Withholding
An employee may claim exemption from withholding in 2020 if:
• They had no federal tax liability in 2019
• They expect to have no federal income tax liability in 2020
To claim exemption from withholding, an employee must:
• Write Exempt on Form W-4 in the space below Step 4(c)
• Complete Steps 1a, 1b and 5
• NOT complete any other steps
Nonresident Alien (NRA)
The 2020 Form W-4 instructions advise a NRA to view Notice 1392 (Supplemental Form W-4 Instructions for Nonresident Aliens) before completing the 2020 Form W-4.
Frequently Asked Questions (FAQs)
In August 2019, the IRS posted a list of FAQs regarding the 2020 Form W-4 for reference by employers and employees.
More information will be posted on the Payroll Department website when available.