Due to recent tax law changes, the 2020 Form W-4, Employee’s Withholding Certificate, has been substantially revised. Although current employees are not required to complete the updated version, anyone who is hired or makes changes to their existing W-4 in 2020 will be required to fill out the revised form. The new W-4 is no longer based on allowances, since the personal exemption was eliminated with the Tax Cuts and Jobs Act of 2017. Instead, it takes into account filing status (including head of household), multiple jobs, dependents, and other sources of income (such as dividends and interest). This information will be needed to properly complete a 2020 Form W-4, which is expected to be officially published in November.

According to the IRS website, the new design “reduces the form’s complexity and increases the transparency and accuracy of the withholding system.” If you want to review your withholding, the IRS recommends using the Tax Withholding Estimator available at www.irs.gov/W4app, which is also expected to be updated with these new changes.

If an employee has owed a significant balance due with their yearly tax return, the IRS may issue a notice requiring you to fill out a new W-4 form. If no action is taken by the employee, the IRS may notify the employer and mandate that additional tax be withheld from the employee’s paycheck.

The IRS also released a draft of Publication 15-T, which outlines how employers are to calculate withholding. Since the new forms are no longer based on exemptions, payroll systems will need to update their software in time for the new year, to account for both types of withholding forms. As the IRS issues new guidance regarding implementation steps, we will keep you updated on this process.

To view a draft of the 2020 IRS Form W-4, click here.