Top #5 things to know about the 2020 IRS Form-W4
Top #5 things to know about
the 2020 IRS Form-W4
Employees need to fill the IRS Form-W4 to intimate their employers about the amount which must be withheld from their paychecks. This amount which is to be withheld usually depends upon the filing status, tax credits, dependents, and deductions of an employee. In case the IRS Form-W4 of an employee is not filled correctly, then the employee might owe paying tax while filing tax returns.
The IRS has designed the new 2020 IRS Form-W4 by closely working with the payroll and tax community to help the taxpayers. By the new IRS Form-W4, taxpayers would be able to find out their correct withholding value. There have been various changes such as a reduction in the tax rates, changes in itemized deductions, the introduction of other dependent credits, etc. which led to the revamping of IRS Form-W4 in 2020.
Major 5 things to know about the 2020 IRS Form-W4
Major 5 things to know
about the 2020 IRS Form-W4
1.Different versions of Form-W4 on file
All the employees don’t need to fill the 2020 IRS Form-W4. The IRS has also designed withholding tables which can function with the new 2020 IRS Form-W4 and the previous versions of the Form W4.
The revamped 2020 IRS Form-W4 must be filled in by the below-mentioned employees.
- Those employees who have been newly hired in 2020 or
- Those who are willing to change their withholdings in 2020
2. The layout is completely different with new tax withholding tables
The layout of the 2020 IRS Form W4 looks completely different from systematic division into five steps and forms an entire page.
- The first step would contain the entry of personal information and the anticipated filing status of an individual.
- The second step is necessary for those employees who have either more than one job at a time or is married with working spouse and filing returns jointly.
- In the third step, the child tax credit and credit for other dependents can be determined that can be claimed while filing returns.
- This fourth step provides instructions for determining any other estimated income of the year, deductions other than standard deductions, and any other additional tax which the employee wants to be withheld.
- The last step contains the employee’s signature and date below the penalties of perjury.
Moreover, two new tables align with the new IRS Form-W4.
- For Automated Payroll Systems, percentage method tables can be used.
- For Manual Payroll Systems, wage bracket method tables can be used.
3. Personal withholding allowances are eliminated
This is the most important change in the IRS Form-W4 which distinguishes itself from Form-W4 of 2019. Previously, withholding allowances were used by employers for the determination of the income tax withholding. Personal withholding allowances are the exemptions from the Federal Income Tax and the more allowances an employee claim the less amount would be withheld from his wages for income tax. However, now employees can easily claim dependents or other deductions on Form W4 rather than claiming withholding allowances for the reduction of federal income taxes.
The fourth step of the 2020 IRS Form-W4 is associated with the additional adjustments that can be made. However, this step is optional and would be feasible in instances such as
- Adjustments for additional withholding can be made if there are other income sources like retirement income or any income from dividends.
- The withholdings can be reduced in this section if any such deductions are different from standard deductions like interest on a student loan, any additional tax deductions, etc.
- Any additional income tax can be entered such as any amount which can be deducted from paychecks including any amount which needs adjustments.
5.Importance on dependents and other tax credits
The 2020 IRS Form-W4 helps employees in indicating if they are eligible for availing the Child Tax credit and any other dependent credits. Employees who are interested in the actual refining of their withholding amount more accurately can also include additional credits such as Education tax credits. These credits can be included in the Form W4 by Step 3 of the Five-Step Process.
Hence, it can be said that the new Form-W4 can be filled if there are any changes in the financial situation of an individual.