ROSELAND, N.J., Dec. 5, 2019 /PRNewswire/ -- The Internal Revenue
Service (IRS) today released a substantially revised Form W-4,
Employee's Withholding Certificate, which will feature a refreshed
look and several new input fields that will replace the familiar
"withholding allowances" box. Workers could be surprised with a tax
bill if the form is filled out incorrectly, making it imperative
that employers and employees understand the new form and how they
can avoid mistakes.
"While the updated form may initially elicit some confusion for
employees, these important changes will ultimately simplify the
ability to set and adjust withholding to achieve desired results,
such as a specific tax refund amount," said Pete Isberg, vice president of government
affairs of ADP. "That being said, the form may require
employees to remember specifics from their most recent tax return
to properly fill out the form and avoid any issues. The 2020 Form
W-4 features significant improvements and simplification for those
with multiple jobs and two-earner families."
Important factors regarding the 2020 Form W-4
include:
Recognizing Major Changes: The IRS 2020 Form W-4 shifts
several computations from the employee to the employer. It
features a new checkbox for multiple jobs and two-earner
households, replacing a difficult and potentially confusing
nine-step worksheet in the 2019 version. If this box is
checked, the tax tables divide the standard deduction and tax
brackets equally between two jobs, so tax rates apply at roughly
half of the income threshold that normally applies. The
updated form will also contain new payroll inputs including
full-year child and dependent tax credits, full-year other income
and full-year deductions. These new inputs will simplify the
process for employees, but will require employers to convert
full-year expected tax credits to reduce per-payroll tax
withholding and use full-year deductions to reduce per-payroll
wages subject to withholding.
Day-One Employee Implications: On their first day of
employment, employees are often asked to fill out a handful of
forms (i.e., I-9, W-4, direct deposit authorization, etc.).
With the new IRS 2020 Form W-4 changes, employees may need more
time to complete the form; e.g., to call their accountant or their
spouse to look up details from last year's return, such as total
deductions, tax credits or other income. Of note, if existing
employees are happy with their current withholding, they can leave
their 2019 or prior Form W-4 in effect. All new employees
hired after January 1, 2020, must use
the new form.
Mistakes to Avoid: There are some potential areas of
confusion as employees and employers become familiar with the IRS
2020 Form W-4. For example, the document asks for "deductions
other than the standard deduction." Employees will want to
ensure they enter expected deductions over the standard deduction
amount, rather than total deductions. Additionally, if an
employee is in a two-earner household and they opt to check the box
in Step 2, both spouses should check the box, but only one of them
should fill out Step 3 and Step 4 of the form.
For more information on navigating the IRS 2020 Form W-4, visit
www.adp.com/W42020.
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