The Internal Revenue Service (IRS) revised and implemented changes to Form W-4, Employee Withholding Certificate, that went 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?
Employees with a hire date on or after January 1st, 2020 must use the redesigned form. In addition, any employees hired prior to 2020 who wish to adjust their withholding must also use the redesigned form, as well as any employees who had previously claimed the exemption from withholding. However, employees with a hire date prior to 2020 who do not need to make changes this year are not required to complete a new form and will have withholding calculated based on their previously completed form.
Please note employers commencing with wave after January 1st, 2020 will be required to use the new form. This is not a requirement by the IRS but rather a stance that Wave took. More information can be found here.
What if my employee doesn’t want to fill out the form?
Employees with a hire date on or after January 1st, 2020 who do not submit a Federal Withholding Certificate will be treated as a single filer with no adjustments.
Some employees may not feel comfortable completing all the information on the new 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 ask them to fill out the new Federal Withholding Certificate and input the 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