New W-4 coming your way

Let the IRS know what you think

Posted June 4, 2019

On May 31, 2019, the Internal Revenue Service (IRS) issued a draft of the 2020 Form W-4, Employee's Withholding Allowance Certificate designed to help make accurate withholding easier for employees starting next year.

The redesigned 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 currently not a central feature of the tax code.

The IRS expects to release a near-final draft of the 2020 Form W-4 in mid-to-late July to give employers and payroll processors the tools they need to update systems before the final version of the form is released in November. To make additional improvements to this initial draft for 2020, the IRS is now accepting comments until July 1, 2019 (WI.W4.Comments@IRS.gov).

This does not necessarily mean your software will need two systems — one for forms submitted before 2020 and another for forms submitted after 2019. The same set of withholding tables will be used for both sets of forms. You may apply these tables separately to systems for new and old forms. Or, rather than having two separate systems, you may prefer to use a single system based on the redesigned form. To do this, you could enter zero or leave blank information for old forms for the data fields that capture the information on the redesigned form but was not provided to you under the old design. Additional guidance will be provided on the payroll calculations needed based on the data fields on the new and old forms.

You may ask all your employees hired before 2020 to submit new Forms W-4 using the redesigned version of the form, but as part of the request you should explain that:

  • They are not required to submit new Form W-4 and
  • If they do not submit a new Form W-4, withholding will continue based on a valid form previously submitted.

For those employees who furnished forms before 2020 and who do not furnish a new one after 2019, you must continue to withhold based on the forms previously submitted. You are not permitted to treat employees as failing to furnish Forms W-4 if they don’t furnish a new Form W-4. Note that special rules apply to Forms W-4 claiming exemption from withholding.

The IRS anticipates the related instructions for employers will be released in the next few weeks for comment as well.

This draft Form W-4 is not for current use, but to be used starting in 2020. Employees who have submitted a Form W-4 in any year before 2020 will not be required to submit a new form merely because of the redesign. You may continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.

This article was written by Darlene M. Clabault, SHRM-CP, PHR, CLMS, of J. J. Keller & Associates, Inc.


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