December 2019
Issue I
2020 FORM W-4
Walking Through the Major Changes
The IRS recently released a new Form W-4 for 2020. This form looks very different from the previous Form W-4, and there are several important changes to be aware of.

Historically, Form W-4 utilized the amount of personal exemptions claimed by an employee to assist employers in determining how much to withhold from each paycheck. One of the many changes resulting from the Tax Cuts and Jobs Act of 2017 was the removal of personal exemptions. Although the IRS attempted to modify the 2018 and 2019 W-4 to account for the changes, many taxpayers found that their withholdings were no longer accurate. For some taxpayers with more complicated returns, large amounts due – or in some cases, large refunds – were seen once their tax returns were filed.

The purpose of Form W-4 is to assist taxpayers who receive wages in paying their tax throughout the year. Ideally, withholdings should be close to your total tax liability on your Form 1040. A large balance due or refund may indicate improper withholdings, as many taxpayers saw during the 2018 tax season.

Thus, the IRS decided to create a new Form W-4 to more accurately calculate employee withholdings. The new Form W-4 is split into the following five steps.
Step 1 is to enter your personal information:
Note: Steps 2 through 4 are not required for all taxpayers.
If steps 2 through 4 do not apply, you will move to step 5.

Step 2 only applies if one of the following conditions are met:
  1. You hold more than one job at a time, and/or
  2. You are married filing jointly and your spouse also works.

If you meet one of the previous conditions, you will complete one of the following steps:
  1. Use the IRS online estimator,
  2. Use the Multiple Jobs Worksheet, or
  3. Check a box if there are only two jobs total.

The IRS recommends using the online estimator for the most accurate withholding calculation. The estimator can be found here. The estimator will give you an estimate of your 2019 tax liability which can then be used to determine an estimate of what your total 2020 withholding should be.

The Multiple Jobs Worksheet can be found on page 3 of Form W-4. This worksheet refers to a table on page 4 of Form W-4 that will help you calculate estimated taxes for your multiple jobs. When using this worksheet, it is important to follow the line by line instructions exactly, as this worksheet can be complicated.
Steps 3 and 4 are the final optional steps. Step 3 takes into account the number of dependents you have for the Child Tax and Dependent Credits, which directly reduce your tax liability.

NOTE: if two spouses are filling out a W-4, only the spouse with the higher income will fill out the dependent info, NOT both spouses.

Step 4 allows you to enter other income and deductions you expect to incur, in addition to any extra federal income tax you would like withheld from each paycheck.
Step 5 is the final step of Form W-4, which instructs you to sign and date to declare that the information you provided is true, correct, and complete to the best of your knowledge.
The 2020 Form W-4 is not simplified from previous versions, but the IRS hopes it will allow taxpayers to more accurately withhold tax throughout the year. If you begin a new job as a W-2 employee, you will be required to complete this version of Form W-4. If you are already employed and have completed a previous version of Form W-4, you are not required to fill out a new Form W-4. However, if you find that your withholdings were not accurate for 2018 or 2019, it may be beneficial to do so. Employers will be required to use this form beginning January 1st. Whether you are an employer or employee, we would be happy to answer any questions you may have regarding the new Form W-4.