One of the most recent implications of the Tax Cuts and Jobs Act is the complete overhaul of the W-4 form. With tax season upon us, it’s a good idea for business owners to examine some of the ways in which this familiar document has changed.

Among the most important changes to taking effect for the 2020 tax season are:

• The name of the form has been modified. Where previously it was known as the Employee’s Withholding Allowance Certificate, it’s now simply called the Employee’s Withholding Certificate.
• Where the form previously required different worksheets to determine a withholding allowance, the new version offers a streamlined four-step process that includes inputting personal information and filing status; inputting information about multiple jobs and/or spouse's employment status; entering the number of dependents to be claimed; and entering relevant information about additional income, withholdings or deductions.
• The IRS has paired the form with an online application that employees can use to quickly determine their withholding amount. This app can be found by visiting the IRS website: www.irs.gov.
• Employees now need to enter more information than in previous iterations of the W-4. Specifically, they need to input pay statements for the employee as well as the employee’s spouse; any other income sources; the most recent federal tax return; and a list of dependents.
• Because the new form requires additional information, it may take some employees a bit longer to complete it. This is something employers need to keep in mind. Allow a little extra time for your employees to modify their withholdings. And of course, make sure you have some copies of this form for them to use as needed.
• There are certain categories of employees who will need to complete a new W-4 form. These include anyone hired on or since January 1 of this year; anyone who previously worked for the company but has been rehired in 2020; and any employee who wishes to make a change to their withholdings.
• As an employer, it’s your right to ask all employees to submit a new form, but you may not require them to. In requesting that all employees submit a new W-4, it’s important to emphasize that this is not mandatory. Only employees in the categories listed above may be required to complete the new version of the W-4.
• If you use an external payroll service, make sure you furnish the service with any new or updated W-4 forms.
• Employees hired in 2020 who do not complete the new W-4 will be treated by the IRS as single filers with no adjustments.

Stay Current With Your W-4s

While these changes are all intended to make life easier for employers and employees alike, there may be some growing pains as companies get used to the new document and its various requirements. Make sure you understand what’s involved with the updated W-4 and that you’re able to guide your employees through completing or revising their forms as needed.