https://www.irs.gov/businesses/small-businesses-self-employed/income-tax-withholding-assistant-for-employersAt the beginning of the 2020 year, the IRS debuted a revised version of the W-4 form, with the
intent of determining an employee’s federal tax withholding with greater accuracy.
Tips for Completing the New Form
All new employees, as well as existing employees who want to adjust withholdings,
must complete the new W-4 form. If an existing employee is pleased with their current
withholdings, they are not obligated to complete a new W-4.
The only portion of the new W-4 that is mandatory to complete is Step 1 (name and
filing status) and Step 5 (signature). If an employee only fills out Step 1, their
withholding amount is based on the standard deduction for their filing status and tax
rate. For taxpayers who typically itemize their deductions, only filling out the mandatory
fields will most likely result in an overpayment to taxes.
If the taxpayer wishes to have no federal tax withheld from their pay, they must write
“Exempt” on line 4C.
If the taxpayer has multiple jobs, or has a spouse who works, filling out the information
in Step 2 will provide greater accuracy for withholding amounts. If a taxpayer has
multiple jobs that have similar pay, or their spouse is paid a similar amount, checking
the box in Section C under Step 2 is sufficient. Otherwise, if the jobs are dissimilar in
pay amount, either use the online estimator (see link below) or use the Multiple Jobs Worksheet to
determine accurate withholding. Then, enter the information on Line 4 (c) under Step 4.
Adding dependent information will further increase withholding accuracy. If income is
$200,000 or less for individual filers, or $400,000 or less if married filing jointly, a
taxpayer may be eligible for a child or other dependent credit. For children under the
age of 17, the maximum child tax credit is $2000. For other qualified dependents (which
can include children 17 and older), the maximum credit is $500.
If a taxpayer itemizes their deductions, it is beneficial to complete the Deductions
Worksheet located on page 3 of the W-4. Taking this information into account will
further serve to improve withholding accuracy. After completing the Deductions
Worksheet, the resulting info will be entered on line 4 (b) under Step 4.
Even though the new W-4 form may feel more complex to the average taxpayer, it is a
relatively straightforward form with comprehensive directions written in an easy-to-understand
format. Provided that the taxpayer has their most current tax return to refer to, completing the
new W-4 should be a painless process that results in substantially improved withholding
Income Tax Withholding Assistant for Employers
There is also a new tool available for employers that do not use an automated payroll system
and calculate their own payroll by hand. It will ease the transition to the redesigned
withholding system and help them determine the right amount to withhold from workers’ pay
for employees that complete the W-4. You can find it here: