The New W-4

The new W-4 for 2020 is officially here. The IRS has redesigned the form to better match the changes from the Tax Cuts and Jobs Act. The biggest change to the form is the elimination of allowances. Personal exemptions were eliminated with the new tax law and the allowance section on the old W-4 was tied to the number of exemptions you could claim on your tax return. So, this is no longer applicable for determining withholding.

The new W-4 has a simpler design and is meant to be easier to fill out than the old W-4. It also provides the option for employees to use the IRS’s online calculator at www.irs.gov/W4App to calculate the additional withholding needed rather than filling out the worksheet portion of the W-4. The online calculator is very user friendly and walks employees through the steps and information needed to fill out their W-4. The new form is also meant to do a better job at factoring in other sources of income: investment, from spouse, etc in determining an employee’s withholding amount needed.

Current employees do not have to fill out a new W-4 but all new employees starting in 2020 will have to fill out the new version of the form. We are advising employers to encourage all their employees to fill out the new W-4 form to ensure they have accurate withholding.

If you prepare payroll through QuickBooks, Intuit says that they will have updates to the payroll tax tables and employee tax input early next year. Intuit also says it will provide the new form for online payroll starting January 1, 2020. We are also expecting an updated Publication 15 with updated withholding tables to reflect the new W-4. The IRS did just release a draft version of the Publication 15 on their website and has provided draft tables for those who calculate payroll manually. The draft tables can be found at https://www.irs.gov/forms-pubs/2020-percentage-method-tables-for-automated-payroll-systems. Be on the lookout for a future article from us once more information is available.

If you would like additional information or to discuss the topics mentioned, please contact Jim Wagoner, CPA at 317-260-4428 or jwagoner@greenwaltcpas.com