IRS Debuts the 2020 Form W-4, Employee's Withholding Certificate
Author: Rena Pirsos, XpertHR Legal Editor
December 5, 2019
The IRS released the completely redesigned calendar year 2020 Form W-4, Employee's Withholding Certificate, on December 4, 2019. The form was overhauled to comply with the 2017 federal tax reform law, which suspends personal exemptions and withholding allowances through 2025. The IRS will release the 2020 withholding tables and methods later in December in Publication 15-T, Federal Income Tax Withholding Methods. (The IRS will no longer publish the tables in Notice 1036, Early Release Copies of the Percentage Method Tables for Income Tax Withholding.)
Employers use Form W-4 to calculate each employee's income tax withholding. On prior versions of the form (i.e., 2019 and earlier years), an employee's income tax withholding was determined by the number of withholding allowances the employee indicated on the form and the employee's tax status - single, married filing jointly or married but withholding at the higher single rate.
Beginning in 2020, an employee's income tax withholding is determined based on the employee's tax status and adjustments (allowances have been eliminated). The 2020 form also contains a new tax status: Head of Household.
The 2020 form is based on five steps. Only Steps 1 and 5 are mandatory for employees to complete:
- Step 1: Enter Personal Information. With the exception of the new Head of Household tax status, the information employees must enter is no different from previous years' Forms W-4;
- Step 2: Multiple Jobs or Spouse Works. Employees who work more than one job or employees in dual-income households may complete this step to account for the additional income and taxes. Completing this step will increase an employee's income tax withholding;
- Step 3: Claim Dependents. Employees may take credit for their tax dependents or other credits in this step. Employees who choose to complete this step will lower their income tax withholding. On prior versions of Form W-4, employees could lower their withholding by increasing their withholding allowances to account for dependents;
- Step 4: Other Adjustments. Employees may account for other income, such as capital gains and other deductions in this step. Employees who complete this step may raise or lower their income tax withholding depending on whether they are accounting for other income or other deductions, respectively. Employees who want more income taxes withheld from their pay may enter a flat amount on Line 4(c); and
- Step 5: Sign here. Employees must date and sign the form under penalty of perjury.
Employees who want to claim an exemption from withholding must write the word "Exempt" underneath Line 4(c). Employers are encouraged to remind employees who claimed an exemption from income tax withholding to refile Form W-4 every year, by February 15, if they want to continue the exemption.
Similar to previous versions of Form W-4, the 2020 form includes worksheets for multiple jobs and deductions that employees can complete to ensure that their withholding more accurately reflects their income and taxes.
New employees starting work on or after January 1, 2020, and employees who must update Form W-4 to account for changes to marital status or tax dependents, must complete and submit the 2020 form to their employers. Employees hired before January 1, 2020, and employees who do not want to change their existing Form W-4 from a previous year, are not required to submit the 2020 Form W-4 to their employers.