The IRS released a new Form W-4, Employee’s Withholding Certificate for 2020. Let’s take a closer look at the new withholding calculation method provided with this form.
Instead of using the personal allowances worksheet, the calculation of whether you need to take additional withholding is now determined in five steps.
Step 1, Enter Personal Information, and Step 5, Sign Here, are required of all taxpayers. Only complete Steps 2–4 if they apply to your situation.
Step 2 is for taxpayers who have more than one job, or who are married filing jointly and both spouses work. There are three options: (1) use the estimator on the IRS site; (2) use the worksheet in Step 2b; and (3) check the box and have the normal amount withheld from each job. This may result in a higher withholding than necessary.
The worksheet to calculate additional withholding amounts is on Page 3 of the form. When completing the form, use the tables on Page 4 to determine the amount that is included on Line 1 of the worksheet. This gives you an amount to divide by the number of pay periods for the job. If you have three jobs on the tax return, the calculation becomes more complex.
Step 3 takes dependents into consideration. Add $2,000 for each qualifying child under 17, and $500 for each dependent who does not qualify for the child tax credit. Step 4, Other Adjustments, is optional and reviews (a) other income; (b) deductions; and (c) extra withholding. Finally, in Step 5, the taxpayer signs the form.
The IRS also has a withholding estimator widget, where you can fine tune your withholding. Use this widget to ensure that you have the best result possible.
I can help guide you through Form W-4 or the widget. Book an appointment on-line or call our office to make an appointment – 716-720-5339.