In December 2019, the Internal Revenue Service (IRS) released an updated version of its W-4 form. Employers use the form to determine each employee’s federal tax withholdings.
- The new form will prompt employees to declare whether they have multiple sources of income (two jobs, two-earner households).
- New employees who fail to submit a Form W-4 after 2019 will be treated as a single filer with no other adjustments.
- The new form uses a five-step process. Only steps 1 and 5 are mandatory.
Employers should become familiar with the updates to IRS Form W-4 and make it available for all new hires and employees who wish to amend their withholding declarations in 2020.
Please note that employers are not required to update W-4 forms that were completed and filed by or before 2019.
- Why redesign Form W-4? The new design reduces the form’s complexity and increases the transparency and accuracy of the withholding system. While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.
- What happened to withholding allowances? Allowances are no longer used for the redesigned Form W-4 to increase transparency, simplicity, and accuracy. In the past, the value of a withholding allowance was tied to the amount of the personal exemption. Due to changes in law, currently you cannot claim personal exemptions or dependency exemptions.
- Are all employees required to submit a new Form W-4? No. Employees who have submitted Form W-4 in any year before 2020 are not required to submit a new form merely because of the redesign. Employers will continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.
Along with this update, the IRS also published a set of answers to frequently asked questions about the 2020 form. These questions and answers address issues relevant to employees and employers, and provide information about why an update of the form was needed. The answers also include a brief description of the form’s structure and optional fields.