2020 brings changes related to Form W-4, Employee’s Withholding Certificate, that is filled out by employees to determine how much federal income tax is deducted from their paychecks. After big changes to the tax code and how federal income tax liability is calculated for tax returns in 2018, the Internal Revenue Service is finally catching up by making changes to this form, which determines an employee’s withholding on their paychecks. This new form is required to be used for any new employees first paid after December 31, 2019 and by any existing employees wishing to update or change their tax withholding with their current employer.
The new form is quite the departure from the old W-4 that most employees are used to seeing, where you mark how many allowances you would like to claim for yourself, spouse, and dependents to determine how much tax will be withheld from your normal paychecks. Due to the changes to the individual tax return that eliminated personal exemptions and instead increased the standard deduction and child tax credit, the new W-4 eliminates the choice to select a number of allowances. Rather, this new W-4 requires a bit more calculation and information, including details about multiple jobs, if your spouse also works, and whether you have other large sources of income, such as interest, dividends, or retirement. If all that sounds a little complicated, the Internal Revenue Service has provided a Tax Withholding Estimator to be accessed online and used to help determine what amounts you should enter on the new Form W-4.
If you need more information or have questions about the new Form W-4, check out the Frequently Asked Questions on the 2020 Form W-4 on the Internal Revenue Service website, contact your SDK representative, or use the contact form below to reach out to an SDKer for help.