Here’s How to Fill Out the New W-4 Form for 2020
Updated: Feb 26
Check your withholding!
One of the signature tax acts occurred in late 2017, as the Tax Cuts and Jobs Act was signed by President Trump. Purported to be a tax cut, rates were reduced a little although there remain seven tax brackets. The act contained several provisions that left taxpayers and preparers' wondering. Another change was the elimination of personal exemptions at the federal level and a doubling of the standard deduction.
In the spring of 2018, the Internal Revenue Service modified the tax tables used by payroll providers to determine the amount of withholding for taxpayers with W2s. These changes were to recognize some of the new tax provisions and were designed to give taxpayers more money in the weekly or biweekly paychecks.
During the 2019 tax season, when the filing for 2018 occurred, many taxpayers found out that they either received a smaller refund or ended up having to pay the tax man, when in the past they had not had to pay. This was true even though many actually paid less tax than the previous year.
The IRS recognized this during 2018 and 2019. The Service has reminded taxpayers that a checkup of your withholding should be done to see if the amount of withholding is accurate for the year. In late 2019 the Service then issued a revised form W4, further confusing many taxpayers.
The following are instructions on both checking your withholding and filing a new form W-4.
Tax Withholding Estimator
This tool allows you to see if you are withholding enough tax to pay the tax bill at the end of the year.
You can access the tool here: https://www.irs.gov/individuals/tax-withholding-estimator
Before you begin you will need the most recent pay statements for you and your spouse.
You will also need an estimate of other income that you will have on your tax return at the end of the year: interest, dividends, capital gains, rental and passthrough income, etc.
Make sure you have last year’s tax return handy to refer to.
The estimator will walk you through the process, looking at your current withholding and estimating the total amount needed for the year. It then will give recommendations as to how much, if any, adjustments you may need to make.
Here is how to fill out the new W-4 form
Now that you know you need to adjust your withholding; you will need to file a new form W-4. I was tempted to create my own set of instructions, but the company Gusto has an excellent blog entry that you can use.
You can find it here: https://gusto.com/blog/payroll/how-fill-out-w-4#An_employees_guide_to_the_2020_W-4
I have been through these instructions several times with taxpayers and find them clear and concise. As always, feel free to contact us if you have any questions on filling out this tax form or any other tax questions.
Here is another good blog on the W-4. Kay Bell writes on many tax issues. Check her out here: https://www.dontmesswithtaxes.com/2019/06/irs-reworks-form-w-4-to-help-taxpayers-withhold-correct-amounts.html