On May 31, 2019, the IRS has released the first draft of the 2020 Form W-4, Employee’s Withholding Allowance Certificate. The draft is available for viewing here.
2020 FORM W-4
The draft Form W-4 no longer uses withholding allowances, which were previously tied to the amount of the personal exemption.
The draft form brings the employee through the five steps for reporting tax-filing status, claiming dependents, whether their household members hold multiple jobs and estimated tax credits and deductions. The draft also allows additional withholding amounts to be applied each pay period. Form instructions and two worksheets are included with the form.
Per IRS Commissioner Chuck Rettig, “The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors.”
A revision to Form W-4 is necessary to reflect new legislation effective January 1, 2018 made by the Tax Cuts and Jobs Act of 2017; for instance,
• personal exemptions were eliminated,
• changes made to itemized deductions, and
• increases in the child tax credit
This is the second time the IRS has attempted to revise the form. In early 2018, a draft of the 2018 Form W-4 was released. This form raised concerns in the payroll community about employee privacy in disclosing additional income and the need for more simplicity within the instructions and worksheets. Based on this feedback, the IRS decided to pull the 2018 draft in September 2018 and delay publishing a revised Form W-4 until 2020.
WHAT DO YOU NEED TO DO
This is only an initial draft; employers should continue to use the current 2019 Form W-4. The IRS expects to release a near-final draft of the 2020 Form W-4 in mid-to-late July to give employers and payroll processors the tools they need to update systems before the final version of the form is released in November.
Paylocity will continue to monitor the upcoming developments of the 2020 Form W-4 and provide you with timely updates.
Thank you for choosing Paylocity as your payroll tax partner.
This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.