Challenges of the New Form W-4 for 2020
Whenever you start a new job, or if you want to adjust the amount of income tax withheld from your paycheck, you have to fill out a W-4 Form. For 2020, the IRS is using a new, updated form. According to the I.R.S. the update “reduces the form’s complexity and increases the transparency and accuracy.”
Lisa Patterson, President of PHB confirms, “The updated form looks different now. Workers are being asked to be more specific about their withholdings to prevent owing taxes at the end of the year. Since it is not what everyone is used to, it has and will spark questions from employees as they are filling it out.”
As an employer, if you need guidance in helping new or existing employees fill out the new Form W-4, give us a call at PHB CPAs. We are an experienced and trusted CPA firm in greater Nashville that handles a variety of accounting services for businesses. Learn more about our business tax services here.
Old Form W-4 vs. New Form W-4
The previous W-4 form allowed you to list the number of exemptions that you wanted to claim. The more exemptions you claimed, the less taxes the employer withheld from your paycheck. And vice versa.
The new form requires you to determine the correct withholding amount by performing a calculation of all income sources— including second jobs, a spouse’s job, self-employment income, and income from dividends and interest.
Five Steps on the New Form
Step 1 and step 5 are mandatory. You must complete those two steps. Step 1 is for your personal information and step 5 is simply where you sign the form. Steps 2, 3, and 4 are optional, but completing them ensures that the amount of your withholding will more accurately match your tax liability.
If, as an employee, you have difficulty filling out steps 2, 3, and 4, PHB can also assist you. Learn more about our tax services for individuals here.