On December 5, 2019, the Internal Revenue Service released a final Form W-4 for use in 2020. Employees complete the Form W-4 so that their employers can withhold the correct federal tax from their paycheck. A significant change for the 2020 form is that it does not have withholding allowances because employees may no longer claim personal exemptions or dependency exemptions. Previously, the value of a withholding allowance was tied to the amount of the personal exemption.
For the new form, the following five steps (as opposed to allowances) are completed by the employee to determine their withholding:
- Step 1: Personal information (including marital status).
- Step 2: Multiple jobs (employee), or whether the employee’s spouse works. This step is completed if the employee holds more than one job at a time or is married filing jointly and their spouse also works. The correct amount of withholding depends on income earned from all of these jobs.
- Steps 3 and 4: Claim dependents and (optional) other adjustments (specifically (a) other income that is not from jobs, (b) deductions, and (c) extra withholding). Steps 3 – 4(b) are completed on Form W-4 for only one job, and these steps are left blank for the other jobs. (Withholding is most accurate if an employee completes Steps 3 – 4(b) on the Form W-4 for the highest paying job.)
- Step 5: Employee signature and date (signifying that all information is true and accurate under penalty of perjury).
Publication 15-T (still in draft form) assists employers in determining the amount of federal income tax to withhold from their employees’ wages.
Employees who have submitted Form W-4 in any year before 2020 are “not” required to submit a new form merely because of the redesign. Employers will continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.
IRS Draft Forms
In November and December 2019, the Internal Revenue Service released the following draft tax forms for 2019:
- Form 1095-B, Health Coverage.
- Inst 1094-C and 1095-C, Instructions for Forms 1094-C and 1095-C.
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage.
- Inst 1094-B and 1095-B, Instructions for Forms 1094-B and 1095-B.
These are early release drafts of IRS tax forms, instructions, and publications that the IRS provides to the public. These draft forms may not be filed or relied upon for filing. Although the IRS generally does not release draft forms until it believes it has incorporated all changes, sometimes unexpected issues arise or legislation is passed, requiring modifications. In addition, forms generally are subject to the U.S. Office of Management and Budget’s approval before their official release, and drafts of instructions and publications usually have some changes before their final release. These early release drafts are on the IRS draft tax forms page and may remain there even after the finals are posted on the IRS final release forms page.