IRS Issues Draft Version of 2020 Form W-4
Background. As a result of the enactment of the Tax Cuts and Jobs Act (TCJA) in late-December 2017, significant changes to Form W-4 were required. The IRS postponed a revised Form W-4 to reflect the important changes for 2018 due to time constraints, and also delayed the revision for 2019 due to concerns from the payroll industry about the initial 2019 draft version of Form W-4. The 2020 Form W-4 will include the necessary changes.
The 2020 draft Form W-4. The 2020 draft Form W-4 now contains a series of the following five steps for employees to complete (or skip if they do not apply): (1) personal information, (2) account for multiple jobs, (3) claim dependents, (4) other adjustments (optional), and (5) signature and date under penalties of perjury. Only steps one and five are required. There is also an employer’s only section (similar to the 2019 version) for an employer’s name, address, employer identification number, and a box to indicate the first date of employment for the employee. This allows an employer to use Form W-4 for new hire reporting purposes.
No more withholding allowances. The 2020 draft Form W-4 no longer uses the concept of withholding allowances, which was previously tied to the amount of the personal exemption. Due to changes in the law, personal exemptions are no longer a central feature of the tax code.
Additional worksheets and table. The 2020 draft Form W-4 adds two worksheets and a table to use if the employee has multiple jobs (higher and lower paying jobs). Worksheet one is used if the employee does not want to use the online IRS Withholding Calculator or use the checkbox to indicate two jobs in the household (relates to the multiple job table). Worksheet two is for employees who expect to claim itemized deductions other than the basic standard deduction.
Draft 2020 Form W-4 instructions. The IRS has said it will be releasing draft employer instructions related to the 2020 draft Form W-4 and additional information in the next few weeks. The IRS provided a link to Publication 15-T(Federal Income Tax Withholding Methods), which will include such information when available.
Employer/employee FAQs. The IRS has issued a list of frequently asked questions (FAQs) for both employers and employees regarding the 2020 draft Form W-4. Beginning in 2020, all new employees must use the redesigned form. Employers may ask their employees hired before 2020 to submit a new 2020 Form W-4, but there is no employee requirement to do so. There will be an adjustment for nonresident aliens and the IRS will provide instructions in Publication 15-T on the additional amounts added to wages to determine withholding.
The IRS notes that employer software will not necessarily need two systems (one for forms submitted prior to 2020 and one for forms submitted after 2020) to process Form W-4s because the same set of withholding tables will be used for both forms. Additional information will be provided on the payroll calculations needed based on the data fields on the new and old forms.
Second draft. The IRS has said that it typically does not release draft forms until it believes it has incorporated all changes. However, with the 2020 Form W-4, the IRS anticipates it is likely the form will change before being released as final and a new draft version (nearly final version) will be posted in mid-to-late July 2019.
Comments. The IRS is providing the 2020 draft version of Form W-4 for information, review and feedback. Comments about the 2020 draft Form W-4 may be submitted to: WI.W4.Comments@IRS.gov. The deadline for comments is July 1, 2019.