The Internal Revenue Service (IRS) revised and implemented changes to Form W-4, Employee Withholding Certificate, to come into effect on January 1, 2020.
What has changed?
Allowances are no longer used to calculate income tax withholding with the intended purpose to make accurate withholding easier for employees. Additionally, employees are no longer able to claim personal exemptions or dependency exemptions due to changes in the law.
Who needs to fill out a new form?
Beginning in 2020, all new employees must use the redesigned form. Similarly, any employees hired prior to 2020 who wish to adjust their withholding must use the redesigned form. Any employees who had submitted a Form W-4 prior to the redesign will have withholding continued that is based on a valid form previously submitted.
Please note that while you can ask already hired employees to submit a new Form W-4, this is not a requirement.
What if my employee doesn’t want to fill out the form?
Employees hired after 2019 who don’t submit a Federal Withholding Certificate are treated as single filers with no adjustments.
Some employees may not feel comfortable completing all the information on the form, in which case the IRS encourages employees to use the Tax Withholding Estimator. The amount determined using the estimator can be entered into Step 4(c).
How else does this affect me?
If you and/or your employees live in a state that previously allowed the Federal Form W-4 to be used in place of your State Form W-4, you will need to check with your State to find out if there are any updates or new requirements - such as filling out the State form instead, or different withholding guidelines.
What do I need to do in Wave?
For any employees hired prior to January 1, 2020, Wave will continue to compute their withholding amounts from the previously entered Form W-4 information. If information is missing from any employees’ Tax Details page, you will receive a payroll notice on your Run Payroll page to let you know about the needed information.
For any newly hired employees in 2020 or those who want to adjust their withholding, you will have to get them to fill out the new Federal Withholding Certificate and input the information when entering their details into Wave.
To get to an employee's Tax Details page, go to the Payroll menu:
- Click Employees
- Click the name of the employee
- Click Tax Details