Do All Employees Need to Fill Out the Updated 2020 W-4 Form?
Filed under: Payroll
Effective January 1, 2020, the IRS has issued an update to Form W-4, known as the Employee’s Withholding Certificate. This widely-used document allows employees to determine how much federal income tax should be withheld from their wages. This redesign has been a long time coming, having been about thirty years since the last major revision. The update was necessary because of the 2017 Tax Cuts and Jobs Act.
Mark Rowley, Owner
RandR Payroll Services
Why the Change?
According to the IRS website, “the new design reduces the form’s complexity and increases the transparency and accuracy of the withholding system.” The new form no longer uses allowances to calculate withholding totals. Rather, it provides a space where employees can directly fill in amounts for additional income, tax credits, and deductions. This information is then used to calculate the withholding amounts.
Anything that simplifies a government form is a good thing, right? In effect, the updated form will allow employees to calculate a more accurate withholding number. As a result, people will be less likely to overpay taxes relative to what they actually owe. This improvement also means people will not receive as much of a tax refund each year.
Who Should Fill Out a New W-4?
If you start a new job in 2020, you’ll fill out the new form. If you remain at your current place of employment for any job you held in or before 2019, they’ll just keep using the withholding information found on your existing form W-4. Unless you wish to update your withholding amount, in which case, you’ll need to fill out the new form.
Truthfully, updating your withholding using the new form may not be a bad idea. It certainly is smart to revisit your tax information to better reflect your current life situation. If you have a child, get married, or divorced –all of these things will impact how much you should optimally withhold from your paycheck.
Got Questions?
If you’re still a little fuzzy on the details and need some support, feel free to reach out to an accounting professional here at R&R Payroll & Bookkeeping Services: (951) 296-0412.
