Federal Income Tax Withholding

Redesigned Form W‐4.

The IRS redesigned Form W‐4 for 2020 and subsequent years. Before 2020, the value of a withholding allowance was tied to the amount of the personal exemption. Due to changes in the law, taxpayers can no longer claim personal exemptions or dependency exemptions; therefore, Form W‐4 no longer asks an employee to report the number of withholding allowances that they are claiming. The revised Form W‐4 is divided into five steps. Step 1 and Step 5 apply to all employees. In Step 1, employees enter personal information like their name and filing status. In Step 5, employees sign the form. Employees who complete only Step 1 and Step 5 will have their withholding figured based on their filing status’s standard deduction and tax rates with no other adjustments. If applicable, in Step 2, employees increase their withholding to account for higher tax rates due to income from other jobs in their household. Under Step 2, employees either enter an additional amount to withhold per payroll period in Step 4(c) or check the box in Step 2(c) for higher withholding rate tables to apply to their wages. In Step 3, employees decrease their withholding by reporting the annual amount of any credits they will claim on their income tax return. In Step 4, employees may increase or decrease their withholding based on the annual amount of other income or deductions they will report on their income tax return and they may also request any additional federal income tax they want withheld each pay period.

An employee who submitted Form W‐4 in any year before 2020 isn’t required to submit a new form merely because of the redesign. Employers will continue to figure withholding based on the information from the employee’s most recently submitted Form W‐4. The withholding tables in Pub. 15‐T allow employers to figure withholding based on a Form W‐4 for 2019 or earlier, as well as the redesigned Form W‐4. While you may ask your employee who was first paid wages before 2020 who hasn’t yet submitted a redesigned Form W‐4 to submit a new Form W‐4 using the redesigned version of the form, you should explain to them that they’re not required to do this and if they don’t submit a new Form W‐4, withholding will continue based on a valid Form W‐4 previously submitted. All newly hired employees must use the redesigned form. Similarly, any other employees who wish to adjust their withholding must use the redesigned form.

Pub. 15‐T provides an optional computational bridge to treat 2019 and earlier Forms W‐4 as if they were 2020 or later Forms W‐4 for purposes of figuring federal income tax withholding. This computational bridge allows you to use computational procedures and data fields for a 2020 and later Form W-4 to arrive at the equivalent withholding for an employee that would have applied using the computational procedures and data fields on a 2019 or earlier Form W-4. See How To Treat 2019 and Earlier Forms W‐4 as if They Were 2020 or Later Forms W‐4 under Introduction in Pub. 15-T.

More information.

For more information about the redesigned Form W‐4 and regulations that provide guidance for employers concerning income tax withholding from employees’ wages, see Treasury Decision 9924, 2020‐44 I.R.B. 943, available at IRS.gov/irb/2020‐44_IRB#TD‐9924 . For information about Form W‐4, go to IRS.gov/FormW4 . Employer instructions on how to figure employee withholding are provided in Pub. 15‐T, available at IRS.gov/Pub15T .