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Income Tax Withholding Using New Form W-4

All employers must use IRS Form W-4 to calculate the amount of income tax to withhold from each employee's pay. The IRS completely redesigned Form W-4 starting with calendar year 2020 to comply with changes made by the 2017 federal tax reform law.

On pre-2020 versions of Form W-4, an employer determined each employee's income tax withholding using the number of withholding allowances the employee indicated on the form and the employee's tax (or marital) status. However, the tax reform law suspends personal exemptions and withholding allowances through 2025. As a result, on the new form income tax withholding is determined based on an employee's tax status and adjustments, and the form is completed in five steps.

Because the changes to the form are so extensive, an employer must identify the employees to whom it is required to provide the new form, know how those employees should complete the form, and use the information provided by each employee on the form to determine proper income tax withholding.

Below are some key tools and resources to help an employer determine withholding using either the new version of Form W-4 or pre-2020 versions of the form.

New Form W-4 vs Pre-2020 Form W-4