It had been 33 years since the last major update of the W-4, so most people working today have been filling it out by habit or memory for years (or even decades). But as of January 1, 2020, all of the employees you hire will need to complete the new Form W-4 as part of their onboarding paperwork.
Seems simple enough, but the new form is a bit of a departure from how most people are used to doing things. Some accountants and tax professionals are even describing the updated employee withholding worksheet as a mini tax return — and nobody gets intimidated by those, right?
Here’s a clear look at all the questions employers (and their employees) are likely to have about the updates the IRS has made and an easy-to-access PDF download of the new Form W-4:
Do my current employees need to fill out a new W-4?
Your existing employees can use the new form if they want to update withholdings for any reason (or after a life change like getting married or having a baby). Other than that, your current employees will not be required to complete a new W-4 — and you will continue to calculate payroll tax withholding based on the information from their most recent W-4.
Why did the IRS redesign the W-4?
The new W-4 is designed to accomplish two things: first, make the form easier for workers to complete. And second, to line up better with the elimination of withholding allowances after the passage of the 2017 Tax Cuts and Jobs Act (TCJA), which prevent employees from claiming personal exemptions or dependency exemptions.
“This change makes sense now that exemptions and deductions are gone, but this won’t be easy for the average person to complete if they’re used to the old form,” says Ufuoma Ogaga of Goshen Bookkeeping & Consulting. “If your employee has questions about the new W-4, it’s worthwhile to suggest they consult a tax professional to make sure they do this right. Nobody likes surprises at tax time.”
Is the new W-4 actually as complicated as it looks?
The new form appears complicated mostly because of the instructions and charts that accompany it, but it’s more straightforward than the previous version of the W-4 when you dig into it.
“Most employees won’t know there’s a new form before they start their job with you, so it might be helpful to give anyone you are onboarding a heads up that they’ll need to know information about A, B, or C before they come in. Preparation will help them better complete the form — and feel better about their answers,” explains David Perry of Latitude Bookkeeping Services.
The American Payroll Association has even created a letter you can use to help inform your new employees about the change.
If you use a cloud-based payroll service provider or an HR service provider, it might be helpful to your new staffer (and you) to have them self-onboard at home before their first day so they can gather any information they need to complete their W-4. Remember that your employees must complete a W-4 prior to their first paycheck.
