Form W-4 was updated for January 1, 2020, on December 5, 2019, but then additional changes were made to the form and released on December 31, 2019. Here’s a breakdown of the changes and what employers need to know.
Changes to Form W-4 from December 5, 2019
On December 5, 2019, the IRS released a new version of the 2020 Form W-4 and retitled it, Employee’s Withholding Certificate. “The primary goals of the new design are to provide simplicity, accuracy, and privacy for employees while minimizing the burden for employers and payroll processors,” IRS Commissioner Charles Rettig said. Changes in the form itself include the elimination of allowances, the addition of “head of household” as a new marital status, and a new adjustment for households with multiple workers.
Here are the key takeaways for employers:
- All employees hired on or after January 1, 2020, must use the new form.
- Employees do not need to complete the new form if they filled out an older version prior to January 1, 2020. For these employees, employers can continue to calculate withholdings from the older forms.
- Any employee that chooses to adjust their withholdings after January 1, 2020. must utilize the new form.
- Employees must use the new W-4 and IRS tables to determine withholdings–flat percentage or dollar amounts are no longer permitted.
Changes to Form W-4 from December 31, 2019
On December 31, 2019, the IRS released a revised version of the 2020 Form W-4 with minor edits to reflect a change in the medical expense deduction.
Additional W-4 revisions
- Updated the percentage to 7.5% on the Deductions Worksheet for Step 4 of the 2020.
- Line 4 changed “from Schedule 1” to “from Part II of Schedule 1”.
Employers are still able to use copies of the form from December 5, 2019, with the wrong percentage of 10%. However, it is important to note the percentage is incorrect and employers should switch to the new form as soon as possible.
Income Tax Withholding Assistant spreadsheet released to aid employers
The IRS has also created a document to aid employers with income tax withholding calculations. Titled the Income Tax Withholding Assistant, the spreadsheet helps companies calculate the amount of federal income taxes to withhold from employees’ paychecks.