*Editor's Note: This blog was originally posted in September 2019 but has been updated as of January 7, 2020 for accuracy and comprehensiveness.

The Treasury Department and Internal Revenue Service have released a redesigned form W-4, the Employee’s Withholding Allowance Certificate, making several changes to earlier draft versions of the form. The new W-4 will be used for tax year 2020. Let’s dive into the new form.

What is the form W-4?

Form W-4 is one of the many pieces of paperwork required of a new employee. An employee’s W-4 determines how much tax his/her employer will withhold from his/her paycheck.

Correctly completing form W-4 is crucial because the IRS requires people to pay taxes on their income gradually throughout the year, and if an employee doesn’t withhold enough, he/she could owe interest and penalties to the IRS. On the other hand, if an employee withholds too much, his/her monthly budget could be tighter than it needs to be.

Withholding can be adjusted based around the employee’s personal circumstances, such as children, or a spouse who works.

What information must be reported on the redesigned W-4?

On the W-4, the employee must disclose his/her

• Name
• Address
• Social security number
• Filing status
• Number of dependents claimed if income is $200,000 or less ($400,000 or less if married filing jointly)

On the W-4 the following optional items are available

• Other income that employee expects, that won’t have withholding (this may include interest or dividends)
• Deductions expected to claim other than the standard deduction
• Any additional money they’d like withheld

In the Employers Only section, the employer then fills out their name and address, employer identification number (EIN) and the first date of the worker’s employment.

The previous form included the following three “worksheets”:

1. Personal Allowances Worksheet
2. Deductions, Adjustments, and Additional Income Worksheet
3. Two-Earners/Multiple Jobs Worksheet

These worksheets were just for your records, intended to help you complete the form accurately.

What did the IRS redesign?

The Treasury and IRS have been working for the past year on creating a W-4 that is more accurate, transparent and simplifies the tax withholding experience for employees. It is their hope that the improved W-4 will help taxpayers better determine the correct withholding amount for their personal financial situations.

Specifically, the new form will replace the three worksheets with more straightforward questions that are intended to make it simpler for employees to figure a more accurate withholding.

It uses the same underlying information as the old form, however it now follows a more personalized, step-by-step approach to more appropriately accommodate individual taxpayer needs.

Do employees who submitted a W-4 before 2020 have to submit a new one?

No, any employee who submitted a W-4 any year before 2020 is not required to submit a new form. Employers will still rely on information from the employee’s most recently submitted form W-4 to compute withholding.

Here are links to the new form and updated withholding rates.

Questions? Contact us.