Last month, the IRS released an updated W-4 form for 2020. The new W-4 form is a radical change and eliminates “allowances,” which means withholding methods are completely different. Now employers have to distribute a new worksheet to employees to help them calculate the proper withholding. This article will outline the important information employers need to know about the new W-4.
The purpose of the IRS’ redesign was to simplify the W-4. While the new design may initially appear overwhelming, many experts say that the change makes the process more straightforward. However, the early feedback on the form suggests that many employees are having a hard time correctly filling out the form. Keep in mind that employers may not help an employee fill out a W-4 form but can direct the employee to the IRS Tax Withholding Estimator.
Only employees hired on or after January 1, 2020 have to use the new form. If a new employee fails to submit a 2020 W-4 form, that employee is treated as a single filer with no other adjustments. For employees hired before then, their W-4s can remain in place. Employers may ask existing employees to use the updated W-4, but those employees are not required to do so. However, if an employee wants to adjust their withholdings after January 1, 2020, that employee must use the redesigned W-4.
Employers are required to keep all completed W-4s on file and to use the forms to determine the appropriate withholdings for each paycheck. With this new drastic change, employers need to advise employees to review their withholding compliance to ensure that employees are not withholding too little tax, resulting in them paying Uncle Sam on their next tax return.