On December 4, 2019, the IRS released its final version of the 2020 Form W-4.
Although the IRS released new withholding tables in 2018, the W-4 remained unchanged until now.
Significant changes to the W-4 were made to bring it in line with the Tax Cuts and Jobs Act (TCJA) which changed tax rates, deductions, credits, and personal exemptions. The TCJA changed the value of personal exemptions and dependency exemptions to zero.
The Most Significant Changes Include:
- No more withholding allowances
- A new Marital Status—Head of Household (with associated tax tables)
- Lines to claim exemptions from withholding have been removed
- New sections have been added to allow for adjustments relating to multiple jobs in a household
Key Points for Employers
- Beginning in 2020, new hires must use the redesigned W-4 form.
- Current employees (who submitted a W-4 form prior to 2020) are not required to submit a new form merely because of the redesign. Employers will continue to compute withholding based on the information from the employee's most recently submitted Form W-4.
- You may ask employees hired before 2020 to submit new Forms W-4 using the redesigned version, but, as part of the request, you should explain that:
- They are not required to submit a new Form W-4, and
- If they do not submit a new Form W-4, withholdings will continue based on a valid form previously submitted.
- All employees hired prior to 2020 who wish to adjust their withholding must use the new, redesigned 2020 W-4 form.
- The IRS encourages employees to do a "paycheck checkup" given the new law and redesigned form.
- Employees can use the Tax Withholding Estimator and other tools found on the IRS website anytime from January 1st on.
Additional Information for Payroll Systems
A new Publication 15-T, Federal Income Tax Withholding Methods, will be released sometime in December for use with the new 2020 Form W-4. It will be available here. This publication will provide information on how to use the new W-4 with both automated and manual payroll systems and will include steps employers can take to determine federal withholding. The IRS posted an early release draft on November 4.
If you use a third-party payroll provider, double-check to make certain that the system will be updated and inquire about any additional steps the employer needs to take.
Remember: the employer is ultimately responsible for payroll even when using a third-party payroll provider.