It’s everyone’s favorite time of year: tax season! Keeping up with tax regulation changes is not exactly top of mind until it’s time to prepare taxes. You are also probably not ready to face the fact that there are major changes to this year’s tax code. Don’t worry; there’s no need to panic and call your accountant again.
Here’s what you need to know about changes to your employees’ Form W-4:
In 2017, Congress approved major tax reform in the Tax Cuts and Job Acts. This has been enacted and takes effect in 2020.
New employees hired in 2020 need to fill out the redesigned Form W-4.
While employees hired prior to 2020 are not required to submit a new Form W-4, their withholdings will continue based on a previously provided form. According to the IRS, the new design “replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.” Well, that’s promising, but we still would not recommend bringing up tax reform at your next company happy hour.
The new Form W-4 no longer calculates “allowances”
Employees should use the Tax Withholding Estimator to ensure that the right amount of federal income tax gets withheld from their wages.
For a step-by-step guide on how to fill out the 2020 W-4 form, check out our partner, Gusto’s Employer’s Guide to the 2020 W-4.
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