The Treasury Department and the IRS are working to incorporate changes into the Form W-4, Employee’s Withholding Allowance Certificate, for 2020.
The revised form implements changes made following the 2017 Tax Cuts and Jobs Act, which made major revisions affecting taxpayer withholding. The most significant change is the redesigned Form W-4 no longer uses the concept of withholding allowances, which was previously tied to the amount of the personal exemption. Due to changes in the law, personal exemptions are currently not a central feature of the tax code.
The IRS issued a draft Form W-4 earlier this year. The IRS reminds taxpayers that this draft Form W-4 is not for current use but is a draft of the form to be used starting in 2020. Employees who have submitted a Form W-4 in any year before 2020 will not be required to submit a new form merely because of the redesign. Employers can continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.
For 2019, taxpayers should continue using the current Form W-4 (PDF). The IRS also continues to encourage people to do a Paycheck Checkup as soon as possible to see if they are withholding the right amount of tax from their paychecks, particularly if they had too much or too little tax withheld when they filed their 2018 taxes earlier this year. People with major life changes, such as a marriage or a new child, should also check their withholding.
Employers will need to make sure their payroll systems will accommodate the existing withholding allowance calculation as well as the new method. In addition to supporting two distinct withholding systems, employers will need to accommodate three sets of withholding calculations:
- The old system based on withholding allowances.
- The 2020 system with a checkbox for optional higher withholding.
- The 2020 system that allows employees to input new data, listed below in the W-4 forms comparison chart.
FAQs on the draft 2020 Form W-4
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