Everything you need to know about the new W-4 form

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The 2020 Form W-4 was released earlier this month with just weeks to go until the end of the year. As the year winds down, are you prepared to handle the new Form W-4 in 2020? If you’re struggling to figure out how this will affect you in the new year, here’s a basic guide to help you get started!

WHY is there a new Form W-4?

Most employees can remember their first day starting a new job and filling out Form W-4, but do you really understand the form when you fill it out? The form has complicated jargon that is not used every day. Many people fill out the form without fully understanding it, which ultimately costs them. If you fill out the form incorrectly and end up withholding too much (and get a refund), you’re essentially giving away an interest-free loan.

The new Form W-4 is meant to be simplified so employees can more accurately describe how much federal income tax should be withheld from their paychecks. The form uses the same underlying information as above, but removes some of the complex worksheets with simpler questions to increase accuracy.

WHO must file the new W-4?

Employees who filed Form W-4 in a year prior to 2020 NO you need to resubmit the form. Employers will continue to calculate withholding based on information from the most recent W-4. Beginning in 2020, all employees who start a NEW work will have to fill out the new form. The form will also need to be completed for life changing events such as getting married or having a baby. Anyone who wants to simply adjust their withholding amount will also need to fill out the form.

WHAT should COMPANIES do to prepare?

Since current employees will not be required to file the new W-4, all employer payroll systems will need to be updated to accommodate the existing withholding allowance calculation as well as the new calculation. There will now be two federal tax tables. Employees with 2019 or earlier W-4 forms will pay taxes using the “Standard Withholding Rate Schedules.” New W-4 employees will pay taxes using the new tax table. Also, step 2 of the form asks about multiple jobs. If the box is checked, the new table should be used, but if it is not checked, the standard table will be used.

WHAT is the biggest change?

The W-4 will no longer have a line to enter an allowance amount, which was linked to personal exemptions on the Personal Allowances Worksheet. This change stems from the Tax Cuts and Jobs Act of 2017 that temporarily suspends personal and dependent exemptions until 2025. The new form is now titled “Employee Withholding Certificate” instead of “Employee Withholding Allowance Certificate “. The form is now divided into 5 steps.

In addition to the new Form W-4, the IRS also published a NEW Tax Withholding Estimator. This calculator guides you step by step to help you estimate your withholding. It’s a great tool for making sure you’re getting the right amount of tax out of each of your paychecks.

Will the new W-4 form really simplify everything?

It is up for debate whether or not the new form actually simplifies the process as it is supposed to. Some worry that it will be more complicated for employees, since they will have to do the multiplication on their own (Step 3) and it could cause errors. Tax Exempt is also not on the form; however, it is still allowed. If you look at the fine print, it indicates that if the person is tax-exempt, he should handwrite “Exempt” in the space below 4(c). This is something that employees may not know they have to do. Also, the electronic PDF used for the OnBoarding electronic signature does not include an entry for this.

What are the next best steps for employers?

Whether the form is simplified or even more complicated, employers have no choice but to prepare for the change in the limited time we have left before the new year. The first steps would be to ensure that your payroll systems are up to date and ready to go by January 1, 2020. Second, it is recommended that you consult with your local accountant or tax professional for guidance on how to handle the gray areas of payroll. new form. W-4.

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