2020-10-07
IRS Issues Final Regulations on Wage Withholding, Redesigned W-4, T.D. 9924, filed with the Federal Register on October xx, 2020.
The final regulations do not require all employees with a 2019 or earlier Form W-4 in effect to furnish a redesigned Form W-4.
The regulations adopt optional computational bridge entries that will allow employers to continue in effect 2019 or earlier Forms W-4 as if the employees had furnished redesigned Forms W-4. This will allow employers to use one process for both 2019 and earlier Forms W-4, and 2020 and later Forms W-4, and free employers from the need to use the number of allowances data field from 2019 and earlier Forms W-4 once the employers apply the appropriate computational bridge entries for their employees.
The 2020 Form W-4 does not use withholding allowances. An employee checks a filing status (single, married filing separately, head of household, married filing jointly, or qualifying widow(er)) on the Form W-4 and, as a result, will generally have the basic standard deduction corresponding to the employee’s anticipated filing status on his or her income tax return taken into account in determining the amount of tax withheld from the employee’s pay.
The 2020 Form W-4 streamlines the multiple jobs procedures and gives employees three options to account for a working spouse or multiple jobs held concurrently.
- employees may use the Tax Withholding Estimator to achieve accurate withholding;
- employees may complete the Multiple Jobs Worksheet and enter an additional amount to withhold from the employee’s pay for each pay period; or
- employees may check the box in Step 2(c) on the 2020 Form W-4 to request withholding using higher withholding rate tables.
For married taxpayers filing jointly with two jobs held concurrently, the effect of checking the box in Step 2(c) is similar to selecting “Married, but withhold at higher Single rate” on a Form W-4 from 2019 or earlier.
The 2020 Form W-4 also allows an employee to enter dollar amounts for tax credits, other income, and deductions the employee expects to claim on his or her income tax return to reflect the permitted allowance under sections 3402(f)(1)(C) and (f)(1)(D) and the increase in the amount of withholding under section 3402(i).
The Tax Withholding Estimator is expected to provide instructions on how to complete Form W-4 to take into account an employee’s personal tax circumstances in a manner that helps protect the employee’s privacy by limiting the entries the employee is required to make on the 2020 Form W-4. The IRS will continue to update the Tax Withholding Estimator based on user feedback and to enhance accuracy, privacy, and the employee experience.