New Form W-4: What’s New, What’s Changed

The IRS, after many drafts, has released the final version of Form W-4.  So why the change? Well, according to the IRS, “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.”

Taxpayers filling out the 2020 form are less likely to receive a large tax bill or a massive refund when filing tax returns in 2021—money that could have been invested or spent on essential expenses throughout the year.  It’s important to note that all newly hired employees in 2020 must fill out the newly re-designed W-4.

Employees who have not had significant life changes such as getting married or having a child have likely not filled out a W-4 in quite a while.  That said, it’s important to remind your staff on revisiting their withholdings each year so that everything is current and most importantly, accurate.

So what’s new about the form? Let’s take a look!

• Form W-4’s title, “Employee’s Withholding Allowance Certificate” has been shortened to “Employee’s Withholding Certificate” because the 2020 new Form no longer calculates “allowances.”
• The Personal Allowance Worksheet from page three of the old Form W-4 is now gone. Why?  Well, it’s due to the TCJA eliminating personal exemptions. These exemptions allowed for deductions against a taxpayer’s personal income, which lowered their taxable income, and because of that so did their federal income tax. These exemptions were all linked to allowances, but with exemptions now eliminated, the need to determine the number of allowances has also been eliminated.
• The Multiple Jobs Worksheet tables have been updated in the instructions section.
• The “Caution” about privacy concerns has been removed and has been replaced with a “Tip”, advising to file 2020 Forms W-2 for all jobs.

DOWNLOAD THE NEW FORM W-4 for 2020 here.

A bit of advice: Stay current and make sure to update your withholding amount each year.  Also, remember the folks at the IRS recommend employees check their W-4 forms each year. For answers to any other questions on the new Form W-4 check out the IRS online.