Last month, we told you about proposed changes coming to Form W-4.

The IRS just released the new draft and is now seeking feedback. Comments on the new form may be sent to WI.W4.Comments@IRS.gov by July 1.

The IRS released some FAQs on the early release of the 2020 Form W-4.

Here’s what you need to know.

What’s the reasoning for the update?

The IRS says that the new design reduces the forms complexity and increases transparency and accuracy of the withholding system. It does use the same underlying information as the old design, but replaces complicated worksheets with more straightforward questions. The agency’s hope is that this makes accurate withholding easier for employees.

What happened to withholding allowances?

Allowances are no longer used in the redesigned Form W-4. The IRS claims this is to increase transparency, simplicity, and accuracy. Previously, withholding allowance was tied to the amount of the personal exemption. However, due to changes in the law, currently you cannot claim personal exemptions or dependency exemptions.

Must all employees submit a new Form W-4?

In short, no. If your employees have submitted a Form W-4 in any year before 2020, they are not required to submit a new one simply because of the new design. Employers should continue to compute withholding based on information on the most recent Form W-4.

However, beginning in 2020, all new employees must use the redesigned form. Any employees hired prior to 2020 who want to adjust withholding must use the new form.

Employees hired prior to 2020 who want to adjust withholding from their pay dated Jan. 1, 2020, or later must use the new form as well.

What to tell your employees about the new Form W-4.

If their tax situation is simple, some questions are optional. The form is divided into five steps and only two are required for all employees to fill out (steps one and five). if they only fill out step one, withholding will be computed based on his or her filing status’s standard deduction and tax rates, with no other adjustments.

Employees should consider increasing withholding if:

  • They hold more than one job at a time and his or her spouse both have jobs.
  • They have income from other sources than jobs that is not subject to withholding.

Employees could decrease withholding if:

They are eligible for income tax credits like the child tax credit or credit for other dependents.

You can read all of the FAQs here.

What’s next.

If you’d like to see the most recent draft released, click here.

According to the IRS, another draft version of the new Form W-4 is expected by mid to late July. This will also seek public comment. A final version of the form is expected to be released in November.

Come next year, you may also need to fill out a new state income withholding form.

PrimePay is staying on top of the latest when it comes to new tax withholding requirements. Be sure to check back with us as more developments occur.

Disclaimer: Please note that this Q&A is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.