What’s New on the Federal W-4 Form for 2020?

Employers know that every time they hire a new employee (and sometimes when an employee’s status changes) there are forms to complete.

One of the first is the W-4 Form. Its official name is the Employee’s Withholding Allowance Certificate, and it tells the payroll processor how many allowances (dependents) an employee is claiming for tax purposes and how much, if any, additional money they would like to deduct from their paychecks.

Without the W-4 form, payroll processors cannot make the correct deductions from an employee’s wages. The form has been in place for decades, but for the tax year beginning 2020, an updated version is being issued.

Established employees do not have to update their forms — older submissions are still valid — but employees hired after January 1, 2020, should use the 2020 form. Current employees who want to update their deductions or status should also use the new W-4 form.

What’s different on the W-4 for 2020?

The IRS recently posted a webinar outlining the reason the form has been updated and the changes that are included. The basics they discussed were that the new design is aimed at making the form easier to complete, more private and accurate.

Changes in marital status

The new form still includes 3 different marital status declarations, but they’ve changed. In the past, the options were:

• Single
• Married
• Married but Withhold at a Higher Rate

For 2020, 3 options remain:

• Single or Married Filing Separately
• Married Filing Jointly
• Head of Household

These new categories should make it easier for payroll professionals to withhold the correct amount of taxes.

Privacy concerns

Another issue the new form takes into account are people who have multiple jobs. Some workers may not want their employer to know if they hold more than one position, but, for tax purposes, this could pose a problem.

Employers withhold the right amount of payroll tax based on the earnings they provide. If a worker and/or their spouse have multiple jobs, their tax bracket could be higher, resulting in underpayments to the IRS.

The new form allows workers to better calculate their earnings and the withholding amounts they would like their employer(s) to use by either accessing the Tax Withholding Estimator at IRS.gov, or using Step 2a on the new form to more accurately calculate their taxes based on the multiple incomes.

New instructions and worksheets

The 2020 W-4 Form includes the form itself and 4 additional pages of information and worksheets.

The first page includes general information about completing the form as well as website links for more information. This provides more details about the new “Multiple Job Households” section and directs taxpayers on how to use the new W-4 to calculate the correct amount of tax to be withheld if they or their family have multiple payroll tax deductions.

On page 3, you’ll find a “Multiple Jobs Worksheet.” It is for the employee’s personal use and takes them through the steps of calculating how much income they estimate they and their spouse will earn if they have multiple jobs and paychecks in the coming year.

This form, completed without the assistance of the payroll processor, allows the employee to maintain the privacy of their information. Once they’ve made their calculations, they will include the amount/deductions they want withheld on the submitted portion of the form (Page 1). No other explanation is required. The page also includes a deductions worksheet to estimate the employee’s 2020 itemized deductions.

Page 4 of the packet includes taxable wages and salary tables for each of the categories:

• Single or Married Filing Separately
• Married Filing Jointly
• Head of Household

What if an employee doesn’t complete the W-4 form?

Just as in the past, employees who do not furnish their tax information with the W-4 form are taxed at the highest rate allowed under the law. These staffers, pre- and post-2020, are categorized with the “single standard deduction.”

Why change the W-4 form at all?

After changes to the tax code were enacted with the Tax Cuts and Jobs Act in 2017, many of the withholding tables were incorrect. Newer versions of the tables have been updated periodically, and the new W-4 form reflects the most current data to calculate withholding amounts.

In addition to accuracy, the new form considers the privacy of workers with regard to disclosing whether they hold multiple jobs or if their spouse does so. For many workers, the ability to keep that information confidential is important.

The IRS’s goal is for employees to withhold the correct amount of taxes with their payroll deductions. When employees do so, there are no additional taxes to be paid, nor refunds to issue. The new W-4 form should make it easier for employees to calculate the correct withholding amounts — resulting in quicker filings and fewer checks to be issued, either from staffers or the IRS.