The IRS has released a revised Form W-4 Employee’s Withholding Certificate to be used beginning in calendar year 2020. Form W-4 needed to be revised in order to more accurately calculate withholding due to the tax law changes made late in 2017.

The new Form W-4 can be completed using a simple method or a more comprehensive method. For the simple method, only Steps 1 and 5 are required to be completed. Completing these few lines will only provide for withholding based upon the one job and no credits. There are no longer any withholding allowances. The status of married but withholding at higher single rate is now gone.

Employees can use Steps 2-4 if they want their withholding to be fine-tuned. Steps 2-4 of Form W-4 can affect withholding by taking into consideration second jobs, jobs of a spouse and credits.

Only employees hired in 2020 and employees who want to change their withholding need to use the revised W-4 for tax year 2020. Other employees can continue to use their original W-4 filing. You may, however, suggest to your employees that they do a paycheck withholding checkup at the IRS’ website http://www.irs.gov/W4App. The withholding calculator should be used when the employee has more than one job or has additional income. The estimator will give the employee an additional amount to be withheld from each paycheck.

Employees using the 2020 Form W-4 will need to complete a separate State withholding form (Wisconsin WT-4, Minnesota W-4MN). The Federal form will not coordinate to State withholding, which is still tied to the number of dependents.

Your payroll software should be able to handle both types of filing statuses (pre-2020 with withholding allowances, and post-2019). If you manually calculate withholding, however, you will need to use both the post-2019 Publication 15-T Federal Income Tax Withholding Methods and the pre-2020 Publication 15 Circular E tables.

As the employer, you can require that all employees complete new Forms W-4 and state withholding forms in order to make your payroll processing more streamlined.

Please let us know if we can answer any questions or assist you with helping your employees understand this new form.

Additional References:
Form W-4 2020: https://www.irs.gov/pub/irs-pdf/fw4.pdf
Circular 15-T: https://www.irs.gov/pub/irs-pdf/p15t.pdf

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Debbie Denny
I joined the Green Bay, WI office of Hawkins Ash CPAs in 2008. I am a Tax Manager and Advanced Certified QuickBooks ProAdvisor. I have been certified in QuickBooks for more than 16 years. I specialize in software consulting and training, small business accounting and tax preparation. I am also experienced in Sage 50 software.

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