The Redesigned Form W-4 – What You Need to Know

The old familiar Form W-4 has a new look this year, thanks to a redesign by the IRS. The revised worksheet eliminates withholding allowances, and instead bases withholding totals primarily on the employee’s filing status and number of dependents. This is an effort to simplify the overall process, increase accuracy, and complement individual tax changes brought about by the Tax Cuts and Jobs Act.

New employees as of January 1, 2020 must complete the updated form. Current employees don’t have to if they already have a form on file with their employer, though now might be a good time to reassess those withholding selections.

The new Form W-4 is divided into five steps:

  1. Enter Personal Information
  2. Multiple Jobs or Spouse Works
  3. Claim Dependents
  4. Other Adjustments (optional)
    1. Include other income not from jobs
    2. Include expected itemized deductions
    3. Extra withholdings
  5. Signature

Step 2 applies to millions of households whose income is supported by more than one job. In this situation, employees now have three options to calculate their amount of tax withholding.

Step 2(a): For maximum accuracy, employees may want to use the IRS’ newly created Tax Withholding Estimator. This calculator asks about the employee’s individual circumstances – source(s) of income, filing status and number of dependents – to provide an accurate estimate of yearly tax liability that should be withheld through paychecks. Employees will generally be guided to enter an additional amount to be withheld on Step 4(c), which should only be done for one of the jobs.

There’s also a refund slider feature within the calculator that allows an employee to choose a target refund amount and adjust his or her withholdings accordingly. The slider should be used by those employees who prefer to receive a refund check during filing time.

Step 2(b): Employees who don’t have access to the Tax Withholding Estimator can complete the Multiple Jobs worksheet on page 3 of the new form. This worksheet will refer to matrix tables on page 4 to determine additional withholding amount(s) needed. To properly use the matrix, it’s important to use the table that properly corresponds to the tax return filing status.

Step 2(c): Households with two jobs that have similar wages can simply check the 2(c) box. Important: this option is only accurate for jobs with similar pay; otherwise, more tax than necessary may be withheld. If this option is used, this box should be checked on Form W-4 for both jobs.

We recommended you fill out the new Form W-4 as soon as possible to ensure that an accurate amount of taxes are withheld from your paycheck. Additionally, if pay for any job changes significantly throughout the year, we recommend completing a new Form W-4 to adjust the amount of withholding.

Please contact your Schneider Downs representative for additional information on the new Form W-4 and/or for any other tax issues.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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