IRS Releases Final Version of 2020 Form W-4

At a Glance

• The final is virtually unchanged from the previous draft.

• The computation of withholding has not changed from the previous drafts.

• Only new employees hired in 2020 or current employees that want to adjust their pay dated 1/1/2020 or later, must complete the new form

• The IRS has released a new Publication 15T, currently in draft form, located here. This contains the withholding tables and going forward will be released separately from Publication 15. The pub 15 and 15T are in the final stages of being finalized and will be published shortly.

Introduction

On December 5, 2019 the IRS released the final version of the 2020 Form W-4, Employee’s Withholding Certificate. The final form is available for viewing here.

2020 Form W-4

Employees hired in 2020 are required to complete the 2020 Form W-4. Employees hired prior to 2020 are not required to complete it unless an adjustment to withholding is necessary for pay dated January 1, 2020 or later. However, employers may ask current employees to voluntarily complete the 2020 Form W-4. Beginning with the 2020 Form W-4, employees will no longer have the ability to adjust withholdings using allowances. Instead, employees will provide employers with amounts to increase or decrease taxes and amounts to increase or decrease wage income subject to withholding.

As with prior versions, the final 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.

Revision History

As mentioned in our previous alerts, 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.

Changes from the Previous Draft

Not much has changed from the previous draft. The previously omitted deductions values are now included on the “multiple jobs worksheet” which are $24,800 for Married Filing Jointly or Qualifying Widow(er), $18,650 for Head of Household, and $12,400 for Single. The tax bracket figures for the worksheet have also been updated with the 2020 rates.

What You Need to Do

Now that the form has been finalized, employers should use the new form for any income withholding election changes employees request starting January 1, 2020 or after. All newly hired employees who will be receiving pay on or after January 1, 2020 should also complete the form. Although it is not required, employers are encouraged to inform employees about the need to perform a “paycheck checkup” to ensure the proper amount of withholding is being calculated. IRS has created a helpful tool for taxpayers to determine if completing a new W-4 is necessary. For more information see: https://www.irs.gov/paycheck-checkup.

Thank you for choosing Paylocity as your Payroll Tax and HCM 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.