Watch ASAP’s webinar
In this video, Diana and Karissa from ASAP Accounting & Payroll provide an overview of the changes and explain how to complete the redesigned W-4. All employees hired in 2020 must complete the new Form W-4; current employees may opt to complete the form to update their tax withholdings. For more information and resources on the 2020 W-4, visit our Help Center.
What’s so different?
Gone are the numbers. No really. There are no longer any “allowances,” which were used to calculate tax withholding on the old W-4. Those “allowances” were based on personal exemptions, which are now unavailable under the current tax code.
Instead, the 2020 Form W-4 accounts for all sources of income as amounts to determine the correct tax withholding amount. These sources of income include multiple jobs, spouse’s income, self-employment, and even income from dividends and interest. It’s almost like a mini-tax return!
Why the change?
In 2017, the Tax Cuts & Jobs Act got rid of the dependency deduction and increased the standard deduction. All taxpayers saw these changes come to life in 2018 on their tax returns. While the IRS waited until now to update this form, this new Form W-4 reflects those changes to the federal tax code.
Impact on workforce – the employees
If you are starting a new job, you will be required to complete this new Form W-4. Or, if you are a current employee and just want to update your withholding, you will be required to complete this new form.
The IRS has created an online estimator to help employees determine the most accurate amounts to withhold. You can access the IRS Tax Withholding Estimator online at www.irs.gov/W4App (you will need a copy of your most recent pay stub and tax return).
Impact on business – the employers
Because the new Form W-4 is significantly different from previous versions, communicating the changes t