The form W4 is the IRS document that determines how much your employer will withhold in income tax from your paycheck. In 2020, the W4 is changing.
To make sure that you’re withholding the right amount each pay period, so you aren’t surprised by a huge bill in April 2021 or find yourself struggling to pay bills each paycheck, you need to know how to fill out the new W4 form properly. Keep reading for an overview of the 2020 changes.
Should I Fill Out The New Form?
The Tax Cuts and Job Act, passed in 2018, changed how the American tax system worked. The IRS has since updated a number of forms to reflect those changes to the tax code.
All new employees will have to fill out the new form starting on January 1, 2020. If you already have a job, you aren’t required to fill out the new form, but you can request to if you want to.
What Will Change On The Form W4 In 2020?
The W4 was redesigned to be easier to understand and simpler to fill out. The biggest change of the new W4 form is that there are no longer withholding allowances. Instead, you are able to calculate your withholding by answering a few simple questions.
You may have less withheld if you plan on itemizing your tax return, or if you have children under 17 or other dependents in your household. You can increase the amount you have withheld each paycheck if you work several jobs, or if your spouse works as well.
You also request additional tax withholding if you have other income, like self-employment income, that won’t have income tax withheld. You can also ask that additional taxes are withheld from your paycheck to ensure that you get a larger return in April.
Also of note is that the changes to the form mean that you can simplify the entire process. Of the five steps on the single-page form, the only required steps are steps one and five. This means all you have to do is fill out your personal information and then sign the form.
While simpler, you should review your financial situation before skipping steps two through four. They can have a bearing on your tax return. You can use this useful site to generate your W2 and payroll forms, which can help you while filling out your W4 and getting everything ready for tax season.
Talk To An Advisor
While changes to the form W4 are supposed to make things simpler, adapting to a new format means that there is the potential for mistakes to be made. The best thing that you can do is talk to a tax professional about your financial situation since they can advise you on the best course of action.
For more information about taxes and personal finance, check out the Lifestyle section of our blog!
