Haven't Hired Anyone in 2020? Beware: Forms Have Changed!

As you begin to get back to business, it may be time to hire new employees. If it’s been a while, be sure you have all the necessary paperwork ready and an onboarding plan in place. Two forms that have changed dramatically this year directly impact an employee's paycheck, so be prepared to update your new hire orientation paperwork.  

Change #1. When the tax code changed for 2020, the federal W-4 form also changed, and it is very different from all previous years. No longer can an employee pick "married with 2 dependents" or "single and 0."  On the new W-4 form a new employee must now determine an actual dollar amount to be taken out of each paycheck. 

Change #2. In addition to the W-4 form change, the State of California has now made the DE 4 "State Withholding Allowance Certificate"  mandatory for 2020 (it used to be optional)! The DE 4 is for California Personal Income Tax (PIT) withholding purposes only. The DE 4 is used to compute the amount of taxes to be withheld from wages to accurately reflect state tax withholding from employee pay.

On the DE 4 form, it states: "Beginning January 1, 2020, Employee's Withholding Allowance Certificate (Form W-4) from the Internal Revenue Service (IRS) will be used for federal income tax withholding only. You must file the state form Employee's Withholding Allowance Certificate (DE 4) to determine the appropriate California Personal Income Tax (PIT) withholding. If you do not provide your employer with a withholding certificate, the employer must use Single with Zero withholding allowance."

Employees who wish to claim exempt must complete the federal Form W-4 and the state DE 4. Employees may claim exempt (from withholding California income tax) if they meet both of the following conditions for exemption:

1. The employee did not owe any federal/state income tax last year (2019), and
2. The employee does not expect to owe any federal/state income tax in the current year.

The exemption is good for one year. Employees who continue to qualify for the exempt filing status, must submit a new DE 4 designating EXEMPT by February 15 each year to continue the exemption. Employees who are not having federal/state income tax withheld this year but expect to have a tax liability next year are required to give the employer a new DE 4 by December 1.

Still confused? Give us a call. Members can use CEA's New Hire Checklist and non-members can purchase the New Hire Packet to make your life easier!