2020 W-4 Withholding Form

For 2020, the IRS has redesigned Form W-4, Employee’s Withholding Certificate, to be more in line with how taxable wages are calculated on the Individual Income Tax Return.  Employees who have furnished Form W-4 in any year before 2020 are not required to furnish a new form merely because of the redesign. All new employees first paid after 2019 must use the redesigned form. Similarly, any other employee who wishes to adjust their withholding must use the redesigned form. Here is the link to the new form on the IRS website: https://www.irs.gov/pub/irs-pdf/fw4.pdf .

Changes Made:

The 2020 W-4 form has several differences from the 2019 W-4 form that you should be aware of. 

• Steps 2, 3, and 4 now have “ask questions” for the first time
• Employees are required to put dollar values for claiming dependents 
• Employees are asked to provide adjustment amounts for other incomes or deductions
• There are now additional worksheets attached, including Deduction and Multiple Jobs Worksheets, as well as instructions on how to fill out everything 

The App: 

The IRS created an app to help employees fill out the 2020 W-4 forms. Employees will be asked a series of questions about their tax withholdings, their number of dependents, and their filing status. Their results will show whether they are expected to have a tax obligation or a refund at the end of the year. The app then gives step-by-step instructions on how employees should fill out their 2020 W-4 forms. To provide maximum accuracy, you are encouraged to use the Tax Withholding Estimator available at www.irs.gov/W4app. You should consider using the withholding estimator if you:

• expect to work only part of the year (this does not apply if you are only switching jobs),
• had a large balance due or refund last year and it is no longer the beginning of the current year,
• have dividend or capital gain income or are subject to additional taxes, such as the additional Medicare tax,
• have self-employment income, 
• prefer the most accurate withholding for multiple job situations, or 
• prefer to limit information provided in Steps 2–4 but do not want to sacrifice accuracy.

FAQ:

Are all employees required to furnish a new Form W-4?

No. Employees who have furnished Form W-4 in any year before 2020 are not required to furnish a new form merely because of the redesign. Employers will continue to compute withholding based on the information from the employee's most recently furnished Form W-4.

All new employees first paid after 2019 must use the redesigned form. Similarly, any other employee who wishes to adjust their withholding must use the redesigned form.

When should I increase my withholding?

You should generally increase your withholding if:

• you hold more than one job at a time or you and your spouse both have jobs (Step 2) or
• you have income from sources other than jobs or self-employment that is not subject to withholding (Step 4(a)).

If you do not adjust your withholding for these situations, you will very likely owe additional tax when filing your tax return, and you may owe penalties. For income from sources other than jobs, you can pay estimated tax instead of having extra withholding.

I want a refund when I file my tax return.  How should I complete the redesigned Form W-4?

The redesigned Form W-4 makes it easier for you to have your withholding match your tax liability. But if you prefer to have more tax than necessary withheld from each paycheck, you will get that money back as a refund when you file your tax return (keep in mind though you do not earn interest on the amount you overpay). The simplest way to increase your withholding is to enter in Step 4(c) the additional amount you would like your employer to withhold from each paycheck. Note, even if you don't have any income tax withheld from your wages, you may get a refund if you are eligible for tax credits such as the Earned Income Credit, the Additional Child Tax Credit, or American Opportunity Credit.

Link to more FAQ on IRS site: https://www.irs.gov/newsroom/faqs-on-the-2020-form-w-4 .