IRS Issues Draft of Proposed 2020 Form W-4

Author: Robert S. Teachout, XpertHR Legal Editor

June 6, 2019

The IRS has published a draft of the 2020 Form W-4, Employee's Withholding Allowance Certificate, which incorporates the changes made by the 2017 Tax Cuts and Jobs Act. The purpose of the proposed new design is to reduce the form's complexity and increase withholding accuracy and transparency, according to the agency.

IRS Commissioner Chuck Rettig said that the revised Form W-4 reflects important feedback from the payroll community and others in the tax community. "The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors," Rettig said.

A significant change in the redesigned form is the elimination of withholding allowances, the value of which were previously tied to personal exemptions. Due to changes in the 2017 tax law, individuals may no longer claim personal exemptions or dependency exemptions.

The IRS cautions employers to continue using current W-4s for 2019 withholding. Beginning in 2020, however, all new employees will have to complete and submit the redesigned form to their employers. Existing employees (i.e., those hired before 2020) who want to adjust their withholding will also have to complete and submit the redesigned form.

On the other hand, employees who have a pre-2020 Form W-4 on file with their employers will not be required to submit a new form merely because of the redesign. Their employers will continue to compute withholding after the 2020 Form W-4 is finalized based on the information from the employee's most recently submitted Form W-4.

Employers have been anticipating the revisions since last year. Following the release of updated tax withholding tables and a revised 2018 Form W-4 that reflected changes made by the tax reform law, the IRS said it would be making further changes regarding 2019 withholding.

The IRS plans to release a near-final draft of the 2020 Form W-4 in mid-to-late July to give employers and payroll processors the opportunity to update their systems before the final version of the form is released in November.

The IRS has posted FAQs about the new form on its website. Stakeholders are invited to submit comments on the changes by July 1. Related employer instructions for figuring federal income tax withholding using the revised Form W-4 have also been released for public comment.