Alternative Investment

Form W-4 Updates in 2020 for Federal Withholding by Employers 

January 2020

The IRS recently released the 2020 Form W-4, “Employee’s Withholding Certificate.” The form allows an employer to calculate federal income tax withholding on employee wages, and the redesigned 2020 W-4 introduces updates to bring the form more in line with the 2017 Tax Cuts and Jobs Act. 

The main departure from previous versions of the W-4 is the elimination of withholding allowances. In the past, allowances were calculated on a separate worksheet, taking into account personal and dependent exemptions. 

However, because personal and dependent exemptions are no longer available under the TCJA, this step is no longer necessary. Instead, the new Form W-4 only requires personal information (such as name, address, and Social Security number), filing status, and signature for the most basic situations. 

In more complicated cases—for example, when an employee has multiple jobs or non-wage income, itemizes deductions, or takes other credits—there are steps to increase or decrease withholding to accommodate these situations, similar to prior years. 

Although Form W-4 underwent a substantial redesign, employees do not need to submit a new 2020 form if they have a valid prior year form already on file with their employers. Employers can use the information from these previously filed forms to calculate withholding, although the withholding may not be as accurate as under the new W-4 form.

However, any newly hired employees, or current employees with changes to withholding, are required to fill out the current 2020 version of the form. 

If you have any questions about the changes for Form W-4, email Stephen Vlasak. Our tax experts will help you understand the changes and how the may effect your company.