The IRS has released the final version of the 2020 Form W-4, retitled Employee’s Withholding Certificate, with changes designed to make income-tax withholding easier for employees.
Here are a few of common questions and answers that employers may have regarding this change
Why redesign Form-W4?
The new design reduces the form's complexity and increases the transparency and accuracy of the withholding system. While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.
What happened to withholding allowances?
Allowances are no longer used for the redesigned Form W-4. This change is meant to increase transparency, simplicity, and accuracy of the form. In the past, the value of a withholding allowance was tied to the amount of the personal exemption. Due to changes in law, currently you cannot claim personal exemptions or dependency exemptions.
Are all employees required to furnish a new Form W-4?
No. Employees who have furnished Form W-4 in any year before 2020 are not required to furnish a new form merely because of the redesign. Employers will continue to compute withholding based on the information from the employee's most recently furnished Form W-4.
How do I treat employees first paid after 2019 who do no furnish a Form W-4?
New employees first paid after 2019 who fail to furnish a Form W-4 will be treated as a single filer with no other adjustments. This means that a single filer's standard deduction with no other entries will be taken into account in determining withholding. This treatment also generally applies to employees who previously worked for you who were rehired in 2020 and did not furnish a new Form W-4.
May I ask all of my employee paid before 2020 to furnish new Forms W-4 using the redesigned version of the form?
Yes. You may ask, but as part of the request you should explain that:
For those employees who furnished forms before 2020 and who do not furnish a new one after 2019, you must continue to withhold based on the forms previously furnished. You are not permitted to treat employees as failing to furnish Forms W-4 if they don't furnish a new Form W-4. Note that special rules apply to Forms W-4 claiming exemption from withholding.
When can we start using the new 2020 Form W-4?
The new 2020 Form W-4 can be used with respect to wages to be paid in 2020.