ADP Workplace Spotlight: Revisions to IRS Form W-4 for 2020
Webcast Description: Whats the Impact to Employers?
Highlights: 2020 Form W-4 & Pub 15-T
• No withholding allowances(!)
• New filing status - Head of Household
• Existing employees do NOT have to complete the 2020 version
• After 2019, new hires must use the 2020 Form W-4
• Must use the 2020 version to adjust withholding after 2019
• Default for new hires who do not complete a Form W-4 after 2019: Single, No adjustments.
Implications for new-hire onboarding
Some new employees may need more time to complete the W-4
and a private room to call their accountant, family members…
Previously: Allowances implied counting family members
Now: “What deductions did we have last year? Tax credits? Other income?”
Do new hires complete Form W-4 in the office as part of on-boarding?
Could the Form W-4 be something to take home to complete?
Only Steps 1 and 5 are required
Name, address, Filing status and signature
If Steps 2 - 4 are blank, withholding is based on the Filing status and rates
Implications for employers/payroll systems
Pre-2020 Inputs
Withholding allowances
Additional tax to withhold
2020 Inputs
Checkbox for two-earner families / optional higher witholding
For example, for MFJ, the 24% rate normally applies for wages over $180,200 • If the Step 2 box is checked, the 24% rate applies over $96,400
Full-year child and dependent tax credits
Full-year other (non-wage) income
Full-year deductions (over the standard deduction amount)
Per-payroll additional amount to withhold
Six tax tables: Regular and higher withholding tables for each of the filing status’ Single/Head/Married.
Enter full-year child/dependent tax credits; convert to per-payroll credits against withholding Enter full-year other income; add to wages to calculate FIT Enter full-year deductions; convert to per-payroll reduction of taxable wages to calculate FIT Add per-payroll additional amount to withhold (no change)