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Payroll

2020 Form W-4 to Be Released in November

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

During an October 3 IRS payroll industry telephone conference call, the IRS announced that it will issue the final version of the 2020 Form W-4 (Employee’s Withholding Certificate) by the end of November. The final version of the corresponding new Publication 15-T (Federal Income Tax Withholding Methods) is expected to be issued in December. And to help employers and taxpayers understand the new Form W-4 and Publication 15-T, there will be an IRS webinar on October 22.

Background

The previous version of Form W-4 calculated a taxpayer’s income tax withholding using a withholding allowance based on the personal exemption amount. In 2017, the Tax Cuts and Jobs Act (P.L. 115-97, 12/22/2017) suspended personal exemptions and substantially increased the standard deduction. The mismatch between the old Form W-4 and the new tax law has caused some taxpayers to be over- or under-withheld. To assist taxpayers with calculating their withholding, while waiting for the new W-4, IRS created its own online withholding calculator. Taxpayers can use this calculator to check their withholding. IRS calls this a Paycheck Checkup.

A draft of the new Form W-4 implements the changes made by the Tax Cuts and Jobs Act. The redesigned form no longer uses the concept of withholding allowances tied to the personal exemption. Instead, the new form is divided into five steps. All employees must complete step 1 (where the employee will enter personal information like name and filing status) and step 5 (where the employee will sign the form). Steps 2-4 are optional; however, if they apply, completing these steps will more accurately calculate the employee’s withholding. See IRS issues draft 2020 Form W-4 (06/03/2019).

Beginning in 2020, all employers must use the new form for new employees. Also, old employees must use the new form if they wish to adjust their withholding. If an old employee does not submit a new Form W-4, employers must continue to withhold based on the W-4 previously submitted.

As a result of the redesign of the 2020 Form W-4, the IRS created new Publication 15-T to help employers and payroll providers calculate federal income tax withholding. A draft was issued in August.

What’s new?

An IRS representative noted on the October 3 payroll industry call that the IRS does not expect any major changes from the draft versions of Form W-4 and Publication 15-T.

The IRS representative did go over a few of the questions that were received from a prior IRS payroll industry telephone conference call, which are also expected to be discussed during the October 22 IRS webinar. In response to one question, the IRS recommends employers follow the manual instructions in Publication 15-T if the employer’s automated system is not current for the new 2020 Form W-4.

In response to another question, the IRS noted that only newly hired employees in 2020, or any employee hired prior to 2020 who wishes to adjust his or her withholding in 2020, must complete the redesigned 2020 Form W-4.

October 22 Webinar

On October 22, at 2:00 p.m. EST, the IRS will be holding a webinar on the 2020 Form W-4 and corresponding Publication 15-T called, “Understanding the 2020 Form W-4 and How to Use It to Compute Withholding.” The webinar will explain: the reason for the new design, Steps 1 through 5 of the new 2020 Form W-4, and who must use the 2020 Form W-4. It will also illustrate how to complete two of the five worksheets from Publication 15-T.

 

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