The IRS has updated, revised, and redesigned the employee withholding Form W-4 for 2020. The new form reflects changes made by the Tax Cuts and Jobs Act which took effect last year, It is designed to be simpler for employees and to allow for more accurate withholding of federal income taxes.

Are you reminded of the old saying….”Hi, I’m from the IRS and I’m here to help.”

The new form takes a different approach from the old form. Namely, employees no longer need to figure out how many allowances they should take. Many found the old Personal Allowances Worksheet and other Deductions/Adjustments/Additional Income Worksheets confusing. Instead, the new form asks for the total amount of deductions taken in the previous year (for instance for child/dependent tax credits and other deductions that exceeded the standard deduction) and for the amount of anticipated other income. It still includes the option to withhold an additional amount from each pay cycle.

Is the New Form Required?

Yes and No. Employees hired pre-2020 are not required to submit a new Form W-4. Businesses should compute withholding based on the information provided from the employee’s most recently submitted Form W-4.

Employees hired in 2020 must use the new Form W-4. And employees hired pre-2020 that want to make any changes to their withholding amounts for 2020 must use the new Form W-4.

Get Your Business Ready

On the positive side, the new Form W-4 is simpler (maybe simpler?) for employees to fill out. But it shifts the burden of several calculations from the employee to the employer, which means that your business will need to be able to accurately handle those calculations. And your payroll system will need to accommodate both the old calculations based on withholding allowances  AND the new withholding calculations based on the amounts the employee predicts will be higher than the standard IRS deduction.

HR List for 2020 Form W-4

Here are some steps you can take to get ready:

Determine that your payroll service and/or software handles the new tax withholding changes accurately and will still accommodate the current withholding methods.

Look at and update your business’s HR procedures for gathering payroll withholding information from new hires, and from current employees who want to make withholding adjustments. Some employees may need more time to complete the W-4, may want a private room to talk with their family members and/or accountant, or may want to look at their prior year’s tax return first.

Educate your employees who are tasked with gathering the new W-4 forms. They’ll need to be familiar with the new form, know its differences, and understand how to handle questions they’ll encounter when helping others complete the form.

Understand how to handle withholding if employees fail to return a completed Form W-4.

Inform all your employees about the IRS new Tax Withholding Estimator to help them avoid any tax filing surprises at the end of the year. The tool is mobile-friendly, uses plain language, and has several new functions.

The final version of the new W-4 for 2020 is expected in November.

We’re Ready to Help

To become better informed on the new Form W-4, see the information at FAQs at IRS.gov. In addition, we are ready to handle the new federal withholding requirements. Over our more than 50 years of experience, we’ve successfully weathered countless changes to tax regulations at all levels – federal, state, and local. We offer the highest level of personal customer service, backed by the world-class power of ADP software (the world’s largest provider of payroll and HR solutions), at a reasonable price. Give us a call!

Change can be confusing, disruptive, and stressful. But we’re here to save you time, increase company productivity, and eliminate hassle. You can concentrate your resources on your more pressing business needs – the areas that make money for your business.