Who is required to complete a 2020 W-4?
- All new employees hired on or after Jan. 1, 2020
- Employees needing to update their exempt status for 2020
Note: Existing employees are not required to complete a new form
How do I update my W-4?
- You can update your W-4 through P.A.S.S.
What is new with the 2020 W-4?
- The form is now called Employee's Withholding Certificate
- Withholding allowances are no longer used
- The form provides options for more accurate tax withholding
- New form is divided into 5 steps
- Step 1 (personal information and filing status) and Step 5 (signature) are required
- Steps 2 - 4 may be used to establish a more accurate tax withholding
What are steps 2-4?
Completing steps 2, 4a, and 4c will increase federal tax withholding. Completing Step 3 or 4b will decrease federal tax withholding.
Why would I consider increasing federal tax withholding?
- If you hold more than one job at a time or both you and your spouse have jobs (Step 2)
- If you have income from sources other than a job not subject to withholding (Step 4a)
Why would I consider decreasing federal tax withholding?
- If you are eligible for income tax credits, such as the child or other dependent tax credit (Step 3)
- If you are eligible for deductions other than the standard deduction (Step 4b)
What do the options in Step 2 determine?
Per the IRS, Step 2 allows employees to choose one of three different options for more accurate withholding, which include tradeoffs between accuracy, privacy and ease of use.
- Option 1 (Step 2a): Most accurate/private option – Use the Tax Withholding Estimator at www.irs.gov/W4app and enter additional amount on line 4c.
- This option allows employee to identify the extra withholding amount to enter on line 4c without revealing additional jobs/income information to their employer.
- Option 2 (Step 2b): Uses Worksheet 1 on page 3 of the W-4 form to provide a roughly accurate withholding without use of the online Tax Withholding Estimator – calculates additional amount to be entered on line 4c.
Note: If either option 1 or 2 are used and the pay amount changes for any of the jobs used in the calculation, a new W-4 will need to be completed for an accurate withholding
- Option 3 (Step 2c): Easiest option – Check box if only 2 jobs are held in household.
- Least accurate and may result in over-withholding. Generally will not result in under-withholding
- Reveals to the employer multiple jobs exist in the household
Why should I consider using the Tax Withholding Estimator?
Individuals may consider using the estimator in the following scenarios:
- Expect to work only part of the year
- Have dividend, capital gain, or self-employment income or are subject to additional taxes
- Prefer the most accurate withholding for a multiple job situation
- Prefer to limit information provided in steps 2 - 4 on the Form W-4 but do not want to sacrifice accuracy
Where can I find the Tax Withholding Estimator?