UHY Advisors: New form W-4 for 2020

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Under the Tax Cuts and Jobs Act, which took effect in 2018, personal exemptions were eliminated in the computation of individual income tax. Following this change, the IRS has released an updated form W-4, now called Employee’s Withholding Certificate. The IRS has issued key points which employers should note with this new release:

• All new employees hired as of January 1, 2020, must complete a new form 
• Current employees are not required to complete a new form but can choose to adjust their withholding based on the new form 
• Any adjustments made after January 1, 2020, must be made using the new form
• Employers can still compute withholding based on information from employees’ most recently submitted Form W-4 if employees choose not to adjust their withholding using the revised form

Due to the substantial changes made to the form, many employees may be uncertain about how to complete the new W-4. Employers should consider hosting training or educational sessions to assist employees in understanding the methodology behind the redesigned form. Employers should be careful not to give tax advice on withholding amounts for their employees during this process.

Additionally, many states currently rely on Form W-4 to calculate state income tax withholding for individuals. Due to the removal of personal exemptions, an item still widely used when calculating state income taxes, many states may be close to issuing their own redesigned Withholding Certificates. Employers must be prudent in checking the requirements for each state in which they have employees. 

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