The W-4 is set to get a makeover in 2020. The IRS believes this reboot will help employees avoid withholding the wrong amount on their W-4s. While it’s still just a draft, it’s clear that these updates will streamline and simplify this essential tax form. Here’s what you need to know.
How it Looks
Click here to see the most recent draft.
The form now fills a full page, but don’t let that intimidate you! The spacious new look allows for simplified, straightforward instructions and definitions right where you need them. For example, not sure what “head of household” means? It’s now right there next to the checkbox.
This update includes sectioning off the different parts (or lines) of the old W-4 into five easily-navigable steps. Of those five steps, only Steps 1 and 5 are required. If you just complete the fields in these two steps, your withholding will be calculated based on your filing status and tax bracket. No other deductions or adjustments will be made. Pretty simple, huh?
If you have multiple jobs, dependents, and/or your spouse works, Steps 2 and 3 of the new W-4 will walk you through how to complete the rest of the form accurately. While the old W-4 accounted for multiple jobs, it was easy to overlook the instructions and explanations the IRS provided in the old format. Not anymore!
However, there’s one major change you need to know about.
Due to recent tax legislation, you can no longer claim an exemption. This means that if you and your spouse both work and you’re filing jointly, you’ll have to complete what feels like a mini tax return to accommodate these changes. The new W-4 provides the necessary guidance for this, including a handy estimator at irs.gov/W4app and the Multiple Jobs Worksheet (included in the instructions).
Finally, Step 4 includes an opportunity to make adjustments to your withholding by accounting for other income, deductions, and any extra withholding you’d like to add.
What the changes mean…
… for current employees with W-4s: If you have nothing new to update, your current W-4 is still valid! However, we highly recommend that you double check it against the new form, just to be safe.
… for employers: All employees hired in 2020 must use the redesigned form. The same goes for any employees who wish to update their withholdings in 2020. Your employees with complete W-4s in the old format do NOT need to update their forms.
But before you worry about having two different versions of the W-4 at the same time… don’t! Both forms use the same set of withholding tables – which is technical speak meaning that Sentric will be able to handle both the old and new forms easily.
When will we have the official form? Great question. While we are still awaiting the final draft, the IRS assures us that “there will be no further substantive changes” from the draft they’ve already provided. We should have an official form to use any day now.
For more information and answers to more specific questions, check out the IRS’s FAQs on the upcoming changes.