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W4 2020

The IRS has redesigned the W-4 form effective January 1st 2020. This was done in order to comply with the Tax Cuts and Jobs Act (TCJA) revision of the Federal tax withholding system (passed by Congress in 2017). Although the form is still in draft mode W-4 2020 Draft, the IRS is set to release the final copy by the end of November 2019. (The Treasury advised that it doesn't expect to make further changes to the form beyond some minor updates for inflation adjustments).

The goal of this update is to enable employees to better estimate withholding throughout the year, resulting in higher net paychecks (and reduced refunds). The new W-4 is formulated with straightforward questions that enable employees to more accurately determine withholding.

ADS and its payroll systems are in the final stages of implementing these updates in accordance with the new 2020 regulations. More details will follow within the coming days.

Some of the changes to the form:

  1. No More Allowances. The concept of withholding allowances such as Married-3 no longer exists. The TCJA eliminated the traditional exemptions for taxpayers and dependents.
  2. New Filing Status. There are now three filing status options: Single, Married, and Head of Household (new)
  3. Multiple Jobs. Employee can account for multiple jobs. The form provides three methods on how to accomplish this, with the most accurate method utilizing the Withholding Estimator.
  4. Employees can claim dependents eligible for the Child Tax Credit. This is to counteract the loss of the exemptions.
  5. Employees can include other items that impact the withholding tax, such as income and deductions not included in the employee's gross wages.

 Important points to note:

  • Effective January 1st 2020, all new hires will need to complete the new 2020 W-4 form.
  • Effective January 1st 2020, existing employees changing their W-4 (i.e. change in marital status), must use the new 2020 W-4 form.
  • Employees who have submitted a W-4 form prior to 1/1/2020 are not required to submit a new form (if they are not making changes). Employers will continue to compute withholding based on the information using the employee's most recent W-4.
  • Once an employee uses the new 2020 W-4, the employee cannot revert to the old form.
  • Employees who claim exempt and therefore are required to submit a new W-4 annually (by Feb 15th), must use the new form to continue claiming exempt. 
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