Hello New W-4
January 8, 2020
The new W-4 for 2020 is causing a lot of confusion for employers and employees since it is drastically different from prior years. To try and understand this form better I filled it out today.
Step 1: easy, basic information and filing status.
Step 2: gets more complicated but I used 2(a) the estimator at www.irs.gov/W4app which will help you fill out Steps 3 & 4.
To answer all the questions in the estimator here is what I needed:
1. My filing status
2. Number of dependents
3. If I, or my spouse, will have a job that withholds federal income tax
4. How many jobs I expect to hold this year
5. How many jobs my spouse expects to hold this year
6. Any other sources of income (interest, dividends, social security, unemployment, etc.)
7. How frequently you and your spouse get paid (weekly, bi-weekly, etc.)
8. Total wages I expect to earn and total wages my spouse expects to earn
9. Most recent Paystub to provide information about federal income tax withheld
10. Amount of wages that will be deferred into a retirement plan (401k, Simple IRA, etc.)
11. Information about tax adjustments (student loan interest, HSA, Alimony paid, Educator Exp)
12. If I was taking standard or itemized deduction
13. Information about tax credits (child tax credit, dependent care credit, education credits, etc.)
Then you get your results based on the information and an estimate of tax that will be owed or refunded at the end of the year. If you don’t like the result and want more of a refund then you adjust the slider for the amount you want and it will provide you the extra amount you should withhold. You can then print a prefilled form to give to your employer.
So what did I think…the new form does require a lot more information surrounding your tax return that some people may not know off the top of their head. Employers cannot expect employees to fill this out quickly. However, I do think it provides a better idea if you will get a refund or owe tax at the end of the year. Everyone’s situation is different and if you have a complicated situation it would be beneficial to reach out to your tax preparer for guidance.
Who has to use the new form?
All new employees in 2020 must use the redesigned form as well as any other employee who wants to adjust their withholding after 2019.
Please see the IRS FAQ for filling out the new five step process.