The New 2020 Form W-4
The IRS has modified Form W-4, Employee’s Withholding Certificate for the 2020 tax year. This update is needed due to the changes implemented following the 2017 Tax Cuts and Jobs Act (TCJA). The IRS has stated that the revisions are intended to “make accurate withholding easier for employees”. The new form is broken into five steps for employees to complete; personal information, accounting for multiple jobs, claiming dependents, other adjustments, and signature and attestation. Worksheets were also added to assist employees with multiple jobs and those who anticipate itemizing deductions, outside the basic standard deduction.
The most noticeable changes was the removal of withholding allowances, which was tied to an individual’s personal exemptions. Personal exemptions were eliminated by the TCJA. Other changes made to the form include removing data fields where employees could claim exemption from withholding. Employees now just write the word "Exempt" in a designated area. Employer instructions related to the new 2020 W-4 will be available in Publication 15-T, Federal Income Tax Withholding Methods.
Employers will be required to have all new employees complete the 2020 W-4 beginning January 1, 2020. Current employees will not be required to complete a 2020 W-4, unless they are requesting a change to their withholding. A complete listing of frequently asked questions (FAQs) can be found at: https://www.irs.gov/newsroom/faqs-on-the-draft-2020-form-w-4.
IRS Tax Withholding Estimator
The IRS has replaced the Withholding Calculator with the new Tax Withholding Estimator. The Withholding Calculator offered workers a convenient online method for checking their withholding; however, with the significant changes under the TCJA, many individuals found it difficult to understand, as it was more geared towards single-wage workers. The new Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals and other taxpayers, a simpler tool to determine the correct amount of income tax they have withheld from wages and pension payments. The Estimator allows for wages from multiple jobs, spousal wages, and other sources of income, to determine the most accurate withholding amount. The Tax Withholding Estimator can be found at: https://www.irs.gov/individuals/tax-withholding-estimator.
Social Security Number Truncation on Form W-2
The IRS released final regulations to allow for the truncation of employee Social Security Numbers on copies of Forms W-2 that are furnished to the employee. These new regulations will apply to returns required to be filed or furnished after December 31, 2020.
IRS will be allowing truncated Taxpayer Identification Numbers on the Form W-2 to help protect people’s Social Security Numbers from identity theft. The new rules would allow employers to voluntarily shorten employees’ nine-digit Social Security numbers on Forms W-2, given to employees, to create truncated taxpayer identification numbers, or TTINs. The first five digits of the Social Security number would be replaced by asterisks or X’s. Shortened Social Security numbers would NOT be allowed on W-2s furnished to the Social Security Administration.