New Form W-4 for 2020
Every year, it seems like there are new additions or revisions to existing tax forms. Well, the ACCA finance team is here to keep you up-to-date on all the changes! Our friends at PAYCHEX had this to share:
What’s New About the 2020 W-4?
The draft of the 2020 W-4, aligns with the 2017 Tax Cuts and Job Act by eliminating allowances and shifting towards dependents and deductions, including:
- Almost doubling the standard deduction from $6,500 to $12,000 for individual filers and $13,000 to $24,000 for joint returns.
- Increasing the Child Tax Credit from $1,000 to $2,000 for children younger than 17 (and $500 for other dependents)
- Some itemized deductions that are still on the books include qualifying home mortgage interest, charitable contributions, state and local taxes (SALT), and medical expenses above 10% of one’s income.
Important Note: Due to the changes in the tax law, significantly fewer people will itemize deductions because of the increase to the standard deduction, as well as the cap to the State and Local Tax (SALT) deduction ($10,000).
Employees can also use worksheets if they have other sources of income and want to calculate the additional withholding amounts, or they can do a “Paycheck Checkup” by using the Tax Withholding Estimator provided by the IRS.
Who Has to Complete the new W-4?
Employees hired on or after Jan. 1, 2020, are required to complete the 2020 W-4. The IRS is encouraging all taxpayers to take this opportunity to review their federal tax withholding information to make any necessary adjustments to income and marital status, as well as review estimated deductions and tax credits.Employees hired before 2020 who don’t want to change their withholding don’t need to complete a new W-4; however, anyone who does wish to adjust their withholding after Jan.1, 2020 MUST provide their employer with the new W-4.
Paychex will be able to handle federal withholding calculations for those employees using the new W-4, and those who do not make any adjustments and still use an older version of the W-4.
The IRS are expected to have the finalized 2020 W-4 by the end of November, or early December.
What About State W-4s?
Most states haven’t announced their plans for state W-4s yet.
For additional information, check out the article on Paychex Worx at www.paychex.com/articles/compliance/irs-releases-draft-form-w4-2020.
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