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IRS Finalizes Redesigned Form W-4

On December 5, 2019, the Internal Revenue Service (IRS) issued the final redesigned 2020 Form W-4, Employee’s Withholding Certificate, to incorporate changes pursuant to the Tax Cuts and Jobs Act of 2017. The new form is intended to reduce the complexity and increase the transparency and accuracy of the withholding system. The 2020 Form W-4 no longer uses allowances, but includes lines to list dollar values to be used to calculate the withholding amount.

Among the big changes to the form are new boxes for workers to indicate they hold multiple jobs or are part of two-earner households. The form contains the following five-step process for determining employee withholding:

Step 1: Enter personal information.

Step 2: Account for multiple jobs and whether spouse works.

Step 3: Claim dependents.

Step 4: Make other adjustments.

Step 5: Sign and date under penalties of perjury.

The IRS released frequently asked questions (FAQs) in August 2019 to help address both individual and employer questions about the new form. Among other issues, the FAQs clarify the following:

  • An employer will not need two separate payroll systems to calculate income tax withholding amounts (FAQ 15).
  • New employees who fail to submit a Form W-4 after 2019 will be treated as single filers with no other adjustments (FAQ 16).
  • Beginning in 2020, new employees will be required to complete new Form W-4 (FAQ 17).
  • Existing employees (those hired prior to 2020) who want to adjust withholding from their pay dated January 1, 2020, or later will be required to complete a new Form W-4 (FAQ 18).
  • Existing employees with the “old” Form W-4 on file are not required to complete a new Form W-4, though employers may ask employees to complete a new Form W-4 (FAQ 19).

The IRS expects to release the final Publication 15-T, Federal Income Tax Withholding Methods in mid-December 2019 to assist employers and payroll providers in calculating federal income tax withholding amounts. This publication replaces the withholding tables used in IRS Publication 15.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.National Law Review, Volume IX, Number 344

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About this Author

Michael K. Mahoney, Ogletree Deakins, employee benefits attorney
Associate

Mr. Mahoney is a member of the Employee Benefits and Executive Compensation group. He focuses on employment tax matters at both the federal and state levels, the review of labor and tax laws governing qualified plans, and the strategic design of executive compensation plans for a global workforce.

Mike advises employers on a multitude of fringe benefit issues including tax advantageous means of structuring such benefits. He routinely assists clients resolve payroll audits, working with federal and state authorities to reduce assessments on behalf of employers. In...

973-656-1600
Shivam Bimal Employee Benefits Lawyer Ogletree
Associate

Shiv assists clients with employee benefits and executive compensation matters.  He advises clients on a variety of issues related to qualified and nonqualified plans, including plan design, implementation and ongoing administration, correction procedures, Code Section 409A issues, and IRS filing requirements.

Shiv frequently advises clients on taxability of various fringe benefits, employment tax withholding and reporting obligations, worker misclassification issues, and issues related to business travelers.  He also has experience with employment tax and executive compensation related issues pertinent to mergers and acquisitions.  Shiv routinely assists clients with payroll audits at federal and state levels.  He also analyzes foreign benefit arrangements to ensure Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) compliance.

212-492-2500