The New W-4!

If your job has anything to do with payroll, or even if you just pay taxes, pay attention: Thanks to the tax reform law (Tax Cuts and Jobs Act), life is more complicated. That’s because the IRS has radically changed the W-4 form and the withholding methods to something entirely new–no pay period withholding and no withholding allowances. At all.

Because the new W-4 presents employees with a bewildering array of choices, you’ll need a good communication plan to explain the options.

Who files the 2020 W-4? The following employees should complete a 2020 W-4 and return it to you promptly:

  • Anyone who wants to change their withholding in 2020
  • Employees who will begin working in 2020
  • Widows or widowers whose spouses died within the previous two years
  • Employees who won’t be able to claim an individual as a tax dependent in 2020
  • Employees whose divorce or separation will become final in 2020, if they are claiming married filing jointly on their current W-4s
  • Employees who anticipate losing other withholding allowances in 2020
  • Employees who won’t be able to claim an exemption from withholding in 2020 (technically, these employees can wait until the middle of February to refile).

The new W-4 is like an abbreviated tax return that determines the correct withholding amount. Allowances are a thing of the past.  Instead, you account for all forms of income–second jobs, a spouse’s job, self-employment income, and dividends and interest.  You also enter information about dependents and tax deductions to adjust your withholding amount.

The online tax withholding estimator can help.  It’s located at https://www.irs.gov/individuals/tax-withholding-estimator.

FAQs can be found here: https://www.irs.gov/newsroom/faqs-on-the-2020-form-w-4.

ADP’s information page on the new form can also be helpful: https://explore.adp.com/w4-eow.