The Tax Cut and Jobs Act (TCJA) brought about numerous changes to many IRS forms. To more accurately calculate employee withholding, the W-4 Employee’s Withholding Certificate was altered for 2020. The previous form focused on personal exemptions, while the new form considers all aspects of income. The new W-4 has five steps associated with it, which can be more accurate and less complicated than the previous schedules attached to the old W-4.

Step One

The first step is where the employee enters his/her personal information, such as name, social security number, and address. The form includes an option for Head of Household and Married Filing Separately (if you wish your withholding to not consider your spouse’s income). The next three steps are optional; however, employees are strongly encouraged to complete them if their situation applies.

Step Two

Step Two is for employees with more than one job, or if they are married and their spouse also works. This step is especially important to make sure there is enough withholding. There are three options to choose from in this step so that the employee can best estimate his/her withholding adjustment. The easiest option is to check the box stating that there are two jobs. The other two options can be more accurate, which include using the estimator at www.irs.gov/W4App or the multiple jobs worksheet on page three of the W-4.

Step Three

Step three allows the taxpayer to report withholding by calculating credits associated with dependents. Additional credits for the year can be recorded in this step as well.

Step Four

Step four allows the employee to account for additional income or deductions. The option to include extra withholding from each pay period is included in this step as well. If no withholding is required, the employee should mark “Exempt” in the white space below 4(c).

Step Five

Step five is where the employee signs and dates the W-4.

Key Points & Reminders

  • Current employees are not required to submit a new form W-4, but they may want to investigate submitting one for more accurate withholding.
  • New employees that begin employment in 2020 must use the new W-4 form.
  • Steps one and five must be completed for the W-4 to be considered valid.
  • Steps two through four, if applicable, will provide a more accurate withholding.

Additional Information & Contact Information

More information about the new W-4 form can be found on the IRS website here. If you have any questions related to the new form, please call a member of our tax team at (513) 241-8313, or contact us to have a member of the tax team reach out to you.