A draft copy of employer instructions for the 2020 revised federal income withholding form was released June 6 by the IRS.
Publication 15-T, “Federal Income Tax Withholding Methods,” is to be used by employers in 2020, which is the first year that the new Form W-4, Employee’s Withholding Allowance Certificate, would be available. The 10-page publication includes information on the percentage method tables for calculating federal income tax withholding and the wage bracket method tables. A four-step withholding worksheet for employers also is included in the publication.
“The computation described in the Employer’s Withholding Worksheet will allow employers to figure withholding regardless of whether the employee provided a Form W-4 in an earlier year or will provide Form W-4 in 2020,” the publication said of the draft worksheet. “The formatting will change, and some of the details may need to be modified slightly to conform to the final Form W-4.”
The employer worksheet in Publication 15-T includes instructions for determining withholding for 2020 Forms W-4 and for when an employee still has on file a Form W-4 that uses withholding allowances.
“There would be just one procedure for both the Form W-4 from before 2020 and new Forms W-4,” the publication said.
The worksheet’s Step 1 is to determine an employee’s adjusted wage amount, taking into account withholding allowances when applicable.
Step 2 calculates the tentative withholding amount based on the adjusted wage, the employee’s filing status, and whether the box in Step 2 of the 2020 Form W-4 was checked to request higher withholding. Step 2 has separate instructions for the percentage method and the wage-bracket method.
Tax credits are factored into the withholding calculation in Step 3, and Step 4 adds the additional withholding amounts per pay period to determine total withholding.
Generally, employees need only to complete for the 2020 Form W-4 Step 1, personal information and filing status, and Step 5, the employee’s signature, the publication said. Employees may use other steps to request higher withholding or report expected tax credits, additional income, deductions, or additional withholding amounts according to their situation.
The percentage-method table’s standard rate schedules may be applied to pre-2020 W-4 or to 2020 W-4 that do not have the box from Step 2 checked, the publication said. When an employee checks the box in Step 2 of the 2020 W-4, employers may use the higher withholding rate column of the percentage method or wage bracket method tables.
Four pages of tables for the wage-bracket method were included in the draft Publication 15-T, though the IRS chose to illustrate only the weekly table. The final version of the publication would include tables for each payroll period. If the tables cannot be used because the adjusted wage amount exceeds the amount shown in the last bracket, the IRS said employers should use the percentage method to determine withholding.
The publication’s worksheet and tables show what the 2020 versions would look like using 2019 tax parameters, the IRS said.
The IRS released a draft of the 2020 Form W-4 on May 30. The form and withholding methods needed to be revised because the federal tax code overhaul (Pub. L. 115-97), which took effect Jan. 1, 2018, suspended the use of personal allowances in calculating individual tax liability. The standard deduction also was doubled as part of the overhaul. Withholding allowance amounts were tied directly to the number of personal exemptions, and IRS had to change the form and withholding methods to better conform with determining tax liabilities under the new law.
The draft W-4 outlined five steps for reporting tax-filing status, whether household members hold multiple jobs, dollar amounts for other income that would not have withholding, and anticipated tax credits and deductions. The draft also allows for additional withholding amounts to be applied each pay period. General instructions and a worksheet accompanied the draft form. The worksheet is not to be filed with the employer.
“The new draft Form W-4 reflects important feedback from the payroll community and others in the tax community,” IRS Commissioner Chuck Rettig said May 31 in a statement. “The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors.”
Newly hired employees and those seeking to change withholding amounts in 2020 would need to file the revised W-4, the IRS said. For 2019, taxpayers should continue using the current W-4.
Comments regarding Publication 15-T may be submitted to WI.W4.Comments@IRS.gov until July 8, said Victor Aledo, an official in the IRS forms and publications division. Comments on the draft W-4 may be submitted at the same email address until July 1. While a final draft of Form W-4 is planned to be released in late July, a second draft of Publication 15-T also is possible if comments result in substantial changes, he said June 6 during the during the agency’s monthly payroll industry teleconference.
Draft forms are not final forms and are not to be filed by taxpayers.
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