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Form W-4 Gets a Makeover: Understanding the New Form

Posted by: Emma Berdanier on January 14th, 2020

The Internal Revenue Service has released an updated Form W-4, which went into effect Jan. 1, 2020. The IRS  redesigned the W-4 Form in response to the Tax Cuts and Jobs Act (TCJA) that was signed into law by President Donald Trump on December 22, 2017.

The TCJA changed the way taxable income is calculated and reduced the tax rates on that income. The new W-4 form reflects those changes. The purpose of the form is to make it easier for the employee to match their withholdings to their tax liability.

The new Form W-4 is significantly different than the previous form. Prior W-4 Forms were based on “Allowances” which were tied to the amount of the personal exemption. The TCJA eliminated personal exemptions thus the redesigned W-4 Form is designed to calculate taxable income. Employers should expect and be prepared for questions from their employees, but should also use caution to not offer tax advice.

Who Needs to Fill One Out

Every employee who will receive their first paycheck from your company in 2020 needs to fill out the new Form W-4.

Ongoing employees are not required to complete a new W-4 Form unless they want to change their withholding. However, as in the past, ongoing employees who claimed Exempt on their 2019 W-4 Form are required to complete a new W-4 Form for 2020.

Navigating the Form as an Employee

The IRS has provided an FAQ page to help people better understand how to fill out the form. Answers are easily accessible on that page. It’s helpful to have the FAQs available as you fill out the form to ensure your full understanding of it.

Explaining the Form as an Employer

The IRS recommends that employers familiarize themselves as much as possible with this new form. They also recommend that employers allow new hires to complete the Form W-4 at home rather than at the office. Doing this ensures that your employees have access to all of the tax information they need to complete the form and can take all the time they need to fill it out correctly.


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