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New W-4 Withholding Form

The W-4 is a federal tax form that employees fill out to tell you how much federal income tax to withhold from their paycheck.­ The amount of federal withholding has always been based on personal exemptions, such as the number of adults and dependents in a household.­ The more allowances a person claimed, the less money the employer would deduct for taxes from the employee’s paycheck.­ This is changing for 2020.­

A new federal law called the Tax Cuts & Jobs Act has eliminated personal exemptions as of 2018, so that taxpayers are supposed to “break even” at tax time instead of owing the IRS money or waiting on a refund from the IRS. The IRS has updated the W-4 to reflect these changes.­

The new form takes employees through five steps that try to identify all sources of income, including second jobs, a spouse’s job, as well as sources like dividends and interest.­ The form also asks for information about dependents and tax deductions to determine the correct amount of tax that the employer should withhold from the employee’s paycheck.­

Some employees may not want to disclose information about income from second jobs or share details about their investment income.­ To address these concerns, the IRS allows employees to use an online tax withholding estimator tool at irs.gov/individuals/tax-withholding-estimator.­ Employees can use this estimator or complete a printed worksheet to determine how much to withhold.­ The amount is entered on a separate “extra withholding” line on the form, without details about how it was calculated.

Employers do not have to get new W-4 forms from existing employees.­ Employers only have to use the new W-4 form for employees hired after 2019.­ Employees hired before 2020 can simply leave their 2019 or prior W-4 form in effect indefinitely, and they will need to fill out a new W-4 form only if they wish to change their tax withholding.­

You can download the new W-4 form by clicking ­here.­ More information about the new W-4 form is available from IRS website by clicking ­here.

Published: 01/07/2020

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