In this episode, Ashley Hamilton explains all of the changes to the new 2020 W-4 Form.
Check out the video below:
Read the Transcript:
No more allowances, head of household, multiple jobs, other income. The new W-4 is Cray. I'm Ashley Hamilton from Complete Payroll and don't freak out about the new W-4, I'm going to explain everything.
After all the hype and waiting, the 2020 W-4 is finally here. Maybe you're excited or maybe you're like, "Why the hell do we need a new W-4 anyway?"
If you guys remember? We've covered the Tax Cuts and Jobs Act a lot on Ashley Explains. The Tax Cuts and Jobs Act reduces individual income tax rates starting in 2018, leading the IRS and Treasury to overhaul the withholding tables and form W-4. The changes have already been made, but we haven't had a W-4 that actually reflected those changes until now.
Listen, let's skip the boring IRS jargon and get to what you need to know. The most important thing for you to remember is that the IRS is not requiring all of your employees to complete a new W-4. 2020 W-4's would only need to be completed by any 2020 new hires or for employees making changes. The forms are different, very different.
So what's different? Allowances are going away, but there are new fields to help us get credit for our dependence and to factor in other scenarios that come up on our personal tax returns.
Step one is our basic information, not much change here. Step two, the new form allows for you to factor in multiple jobs you may have or if you're married and filing jointly, it allows for you to factor in your spouses jobs. Step three is now where we can factor in our children dependents and our non-children dependents. Step four is a new area for us to factor in. A, other income we may get throughout the year. For example, interests, dividends or retirement income. B, deductions we plan on using on our personal tax return. This section will be utilized only if you plan to itemize and not take the standard deduction but would cover student loan interest in deductible IRA contributions to name a few. Lastly, C, extra withholding. If you want to withhold any additional withholding on top of what you would normally calculate, you can do that here. Step five is another familiar step and that's a signature line. No explanation needed.
One other thing I want to know because I know you're wondering what about my employees who claim exempt? The form still addresses how your employees can claim exempt in the instructions on page two. Your employees will have questions, but we do have resources for you. The IRS has an FAQ page for the new form, and of course there's an app for that. The IRS has a withholding tax estimator. Send your employees here.
So that's the new 2020 W-4. If you have any questions, shoot me an email at firstname.lastname@example.org.
Happy holidays and thanks for watching!
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