The revised W-4 form we have been waiting for since late 2017 is now official. Employers are now expected to use the new one for all new hires. Note that tax withholding tables have not changed. Employers use the data from the new form alongside existing withholding tables to determine how much to withhold for federal income tax and FICA.
There have been plenty of questions surrounding the new W-4 form since regulators began releasing draft versions in 2019. Even with the new form now official, plenty of questions remain.
Why was the form redesigned?
The Tax Cuts and Jobs Act of 2017 initiated fundamental changes to federal tax law, changes that included simplifying the withholding system. IRS officials determined that the W-4 had to be redesigned in order to accommodate said changes.
Are withholding allowances still in play?
No, the Tax Cuts and Jobs Act eliminated them in order to increase transparency. Improving accuracy was also a concern, especially as it relates to personal and dependent exemptions. Such exemptions are no longer allowed, thus leaving the old form intact would have been confusing.
Is the new form required for all employees?
All employees first paid on or after January 1, 2020 must submit the new W-4 form. All others are not required to do so. They may choose to submit a new form if they believe it would be more accurate to their circumstances.
Should employees increase their withholding?
The W-4's redesign has left some employees wondering if they should increase their withholding. In theory, this should not be necessary. In practice, things differ from one employee to the next. The IRS maintains a free tool on its website to assist people who want help determining how much they have withheld. If current withholding is not enough to satisfy an employee's tax obligations, a new form should be submitted.
Can employees submit the new form with just Step1 completed?
Yes, Step 1 is the only mandatory step on the form. In the event an employee completes that step, signs and returns the form, his or her obligations are met. That employee's withholding will be based on a combination of his/her filing status and the new standard deduction under the Tax Cuts in Jobs Act.
Must employees account for multiple jobs on the W-4 form?
Step 2 of the new form allows employees to account for multiple jobs and thus increase their withholding. However, this step is voluntary. Employees concerned that they might not have enough withheld to cover their tax obligations may elect to complete this step in order to increase withholding.
What do I do if a new buyer fails to submit the form?
The W-4 form is a tool designed to help employers figure out how much to withhold from employee paychecks. It is expected that every new hire will fill out a W-4 during the onboarding process. However, employers still have withholding obligations even when new workers fail to submit their forms.
If a W-4 form is not submitted for a new hire, the employer must still withhold for federal income tax and FICA. Withholding in such circumstances is based on single filer status and the new standard deduction. No other adjustments are made unless, and until, the new hire submits a W-4 form.
The new W-4 form may seem more complicated, but it is really quite simple. As a nationwide provider of payroll and benefits administration services, we have helped many of our clients understand the new form and all of its implications. We can do the same for your company.