One month into the New Year, and with the start of Tax Season, it is important for employees as well as employers to be familiar with the major changes to the new Form W-4. Here are some main points for employers to keep in mind:
What You Should Know About the New Form W-4
Anything related to taxes can create a bit of anxiety. Through our research of IRS guidelines and information provided by the American Payroll Association (APA) and Society of Human Resources Management (SHRM), we would like to share what we have identified as how to communicate W-4 Form changes.
Employers should be prepared to explain why new employees need to complete a Form W-4 that looks very different than what they have seen in the past. You may be the first employer providing this new form to them and this is the first major change to the Form W-4 in 30 years! The release of the 2020 Form W-4 is as a result of the 2017 Tax Cuts and Jobs Act (TCJA). The new Form W-4 was created by the IRS to help individuals more accurately claim their withholding according to the new tax brackets created by the TCJA.
All new employees first paid in 2020 or existing employees who want to adjust their tax withholding need to complete a 2020 Form W-4. Existing employees who worked in 2019 or prior are not required to fill out a new form, unless they claimed Exempt.
The 2020 Form W-4 should be provided during the new hire onboarding process, and for any employee who wants to change their tax
Understand the Changes
Here are a few key changes to the form:
– The form has a new title, “Employee’s Withholding
– The form is divided into five (5) steps.
o Two steps are mandatory (1 and 5)
o Three steps (2, 3, 4) are optional
– A new filing status is available, head of household
– The form allows for an adjustment for households that have multiple workers/multiple jobs
– Claiming allowances has been removed
– It contains worksheets to help with withholding calculations
– The form requires an estimate of total deductions and tax credits
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Wishing you a successful year ahead!
Chief Operating Officer