As referenced in the attached article, “IRS Issues 2020 Form W-4,” on December 5, 2019 the Internal Revenue Service (IRS) issued a revised W-4 from, also known as the “Employee’s Withholding Certificate,”, that is required to be used by employers beginning January 1, 2020. The W-4 form is used by employers to determine how much should be withheld in federal taxes from an employee’s paycheck based on an employee’s designated dependent allowances.
The revision to the W-4 form results from the changes imposed by the Tax Cuts and Jobs Act of 2017, which was enacted by the Trump administration in December of 2017 and applied to the 2018 tax year. The Tax Cuts and Jobs Act of 2017 significantly changed the federal income tax parameters, including changes to itemized deductions and the alternative minimum tax, an expanded standard deduction and child tax credit, and lower marginal tax rates across salary brackets. Due to these changes, the IRS released the revised W-4 form to harmonize the tax withholding process going forward.
The new W-4 form is not intended to replace historical forms employers have on record and are only required for new hires or employees who are looking to change their federal tax withholding; historical W-4 forms on record will still be honored and there is no action needed for anyone who wishes to remain at their current tax withholding level. If a newly hired employee fails to fill out the new W-4 form in 2020, they will be treated as a single filer with no adjustments.
In addition to the revised form, the IRS also released a set of frequently asked questions to help assist employees and employers in navigating the new form and answering questions from why the redesign was needed to whether an employer can require all their employees, new hires and those hired prior to 2020, to submit a new W-4 form.
Contact your Cowden representative for more information on this or other compliance issues.