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2020 Form W-4


Terry D EA

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I have been looking at this form for some time now and have been trying to figure out where the employee who is a new hire enters the desired withholding. It appears after running the withholding estimator from the IRS website, the amounts of withholding go on line 3 in the claiming dependents section. This is where the website pre=populates the form.However this amount is the total withholding of all jobs and is the annual figure. After reading Pub 15T it appears the employer has to use the appropriate table to calculate the withholding based on the information on the new form w-4. I need to know if my thinking is correct. I run payroll for a few companies and I want to be prepared for new hires.

Also, when using the IRS estimator, the total withholding is based on numerous factors and returns the final amount as a total withholding for all jobs. So, as I see it, the employer needs to only look at their particular job and calculate the withholding plus any additional amount the employee indicates. I can see employees really getting this messed up.

Also, I have clients that are asking about this form and felt really stupid this evening that I couldn't help them very much. They said their employer's accountant told the existing employees who were under 2019 w-4 and earlier they had to fill out the new form. That is not accurate and this accountant is showing zero federal withholdings based on what I don't know. Does anyone have a simplified explanation to get my head straight on this??? Medlin maybe??? I appreciate anything anyone can add to this.

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It's pretty bizarre changes.  I've had one client need help with it so far.  Basically it assumes the Standard Deduction based on your filing status, unless the employee claims otherwise and goes through all the work.  For her employee, claiming just Single ends up taking out about $20 less per paycheck than the old Single 1.  Since the employee wanted to raise her withholding from each check by $20, i had to tell her to claim extra $40 - that was fun explaining. 
 

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On 2/7/2020 at 6:11 PM, Terry D said:

I. . . . .  So, as I see it, the employer needs to only look at their particular job and calculate the withholding plus any additional amount the employee indicates. I can see employees really getting this messed up. . . . . 

 

There have multiple lengthy threads about this topic for the past several months. Instead of asking us to regurgitate what has already been posted, I suggest you read those threads. It's the employer's responsibility to follow their employees W - 4 as filed nothing more.

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If you or the client is more comfortable with the former "allowances", the new calculations have "implied" allowances.  Married filing jointly is similar to the former married/3.  The two job settings, besides having a different set of calculations, has no implied allowances.  All other status choices have two implied allowances.  This was more talked about at the end of 2018, before they delayed the implementation to 2020...

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Since the personal exemptions are zero on the 1040, there are no allowances on the W4. The withholding tables broke from past practices of using a number much smaller than the standard deduction so workers were more likely to have a cushion of extra withholdings. The new tables use the full 12,400 standard deduction, so that cushion is gone.

A single worker with one job who just checks single on the new W4 then signs it, will be withheld very close to what their actual tax will be. Tell your clients that, and if they want a cushion they'll have to enter an amount on the extra withholding line to ensure a refund.

The new form should also prevent the perennial disaster we've all seen, where a couple gets married and both changed their W4s to married, and end up owing a lot when they file their first joint return. A lot of wedding sites/magazines were actually recommending the newlyweds do this.

And it's designed to help the person who works several jobs, and has no withholding on the lower earning jobs. Now they can have their main job do all of the withholding for all of their jobs.

To me the biggest downfall is going to be kids working summer jobs having unnecessary withholding then having to file a return to get it refunded. They should have put a 4th checkbox at the top, that says, I am single and expect my total income to be less than 12,400. This would let employers know to not withhold any taxes. If you read the instructions, your supposed to write 'EXEMPT' in a blank space under 4(c), which is really poor form design.

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