New 2020 Form W-4
Due to the Tax Cuts and Jobs Act, the Internal Revenue Service (IRS) released a revised federal Form W-4 for tax year 2020. The 2020 Form W-4, Employee’s Withholding Certificate, is significantly different than the current form.
How does this impact me?
- Employees hired before 2020 are not required to submit new forms; withholding will continue based upon their previously-submitted valid W-4.
- Employees hired before 2020 who wish to adjust their withholding after January 1, 2020, must use the new form.
- Employees hired on or after January 1, 2020, will be required to use the new form.
- Employees hired on or after January 1, 2020, who do not submit a valid W-4 form will be treated as a single filer with no adjustments.
Please note: The Internal Revenue Service (IRS) is not requiring all employees to complete the revised form and has designed the withholding tables so that they will work with both the new and prior year forms. However, certain employees will be required to use the new form: those hired in 2020 and anyone who makes withholding changes during 2020. Draft Publication 15-T provides worksheet and tables to figure federal income tax withholding for Forms W-4 from 2019 or earlier and Forms W-4 from 2020 or later.
While the IRS does not require all employees to complete the revised form, we recommend you perform a “paycheck checkup” to see if you need to make adjustments to your current withholding. To conduct the checkup, you can use the IRS’s Tax Withholding Estimator (www.irs.gov/W4App). To effectively use the estimator, it is helpful to have a copy of your most recent pay stub and tax return. It is likely that the estimator will be updated to account for the 2020 tax tables in early January.
Again: if you do not submit a new form, withholding will continue based on your previously submitted form.
The New Form W-4 Layout
The new form may be found here: https://www.irs.gov/pub/irs-pdf/fw4.pdf
The new Form W-4 has been re-named ‘Employee’s Withholding Certificate’, reflecting the fact that the form no longer uses personal allowances. Instead, the new Form W-4 assigns dollar values to each adjustment and applies those values as credits against an employee’s basic withholding amount. This should make it easier for employees to complete the form and understand the effect of each adjustment.
Before completing the 2020 Form W-4, please read the instructions that are included with the form. You must complete Steps 1 and 5. Steps 2, 3, and 4 are optional, but completing them will help ensure that your federal income tax withholding will more accurately match your tax liability. Step 1 is for your personal information; Step 2 is for households with multiple jobs; Step 3 is used to claim tax credits for dependents; Step 4 is for other adjustments (additional income such as interest and dividends, itemized deductions that exceed the standard deduction, and extra tax you want withheld); and Step 5 is where you sign the form.
The updated version has been expanded and is now a full page (plus three pages of instructions, worksheets, and tables). It also has more detailed instructions for employees to fill out the sections, now labeled Step 1 through Step 5. Only Step 1, the employee’s personal information, and Step 5, the employee’s signature, are required; Steps 2, 3 and 4 (regarding household jobs, dependent credits, and other adjustments and deductions) are optional. However, no adjustments will be applied if the employee leaves Steps 2-4 blank. An employee who only completes Steps 1 and 5 should have his or her payroll taxes withheld in accordance with the default rate associated with the filing status indicated in Step 1.
The IRS takes your privacy seriously and suggests that, if you are worried about reporting income from multiple jobs in Step 2 or other income in Step 4(a), you check the box in Step 2(c) or enter an additional withholding amount in Step 4(c). To determine the additional withholding amount, you can use the Tax Withholding Estimator.
The IRS has also published Frequently Asked Questions that you may find helpful as you complete the form.
Please note that the University of Massachusetts cannot provide individual guidance on completion of the new W-4 or any related tax implications. We recommend that you contact your tax consultant with any questions that you may have.
Exemption from Withholding: You may claim exemption from withholding for 2020 if you meet both of the following conditions: you had no federal tax liability in 2019, and you expect to have no federal income tax liability in 2020. To claim exemption from withholding, you must write “Exempt” on Form W-4 in the space below Step 4(c). Then, complete Steps 1a, 1b and 5. Do NOT complete any other steps. Sample Form W-4 Claim Exemption.pdf
If no 2020 Form W-4 is filed, the employer should withhold based on the last Form W-4 the employee provided where exemption from withholding was not claimed. If there is no prior Form W-4 where exemption was not claimed, the employer should withhold at single with no adjustments beginning on February 17, 2020.
Nonresident Alien (NRA): The 2020 Form W-4 instructions advise an NRA to view Notice 1392 (Supplemental Form W-4 Instructions for Nonresident Aliens) before completing the 2020 Form W-4. The IRS will provide instructions in the 2020 Publication 15-T, Federal Income Tax Withholding Methods, on the additional amounts that should be added to wages to determine withholding for nonresident aliens.
Federal Income Tax Withholding
Federal tax withholding tables have changed for 2020. The new Publication 15-T, Federal Income Tax Withholding Methods, to be released in mid-December for use with the new 2020 Form W-4, will provide the employer steps to figure federal withholding. The IRS has also released a draft of Publication 15-T. Draft Publication 15-T provides worksheet and tables to figure federal income tax withholding for Forms W-4 from 2019 or earlier and Forms W-4 from 2020 or later.
Commonwealth of Massachusetts Income Tax Withholding
Information for Massachusetts M-4 Form can be found at the Commonwealth of Massachusetts website. If the allowable Massachusetts withholding exemptions are the same as being claimed for federal income tax purposes, the employee should complete Form W-4 only.
The Massachusetts Department of Revenue has not issued new income tax withholding tables for 2020 (Circular M). The Commonwealth of Massachusetts has not updated their withholding tax rate for 2020. It was 5.05% for 2019.