Wednesday, November 30, 2022
HomeBusinessWhat’s the New W-4 and How Does It Affect Me?

What’s the New W-4 and How Does It Affect Me?

On December 5, 2019, the IRS released the final version of the 2020 Form W-4. The new 2022 W4 form PDF has been simplified to help employees reduce complexity and increase transparency. Because employees will better comprehend how to fill out the form, tax withholdings will be more accurate country-wide.

Yet, even with its reduced complexity, many employees are still wondering how to correctly fill out a Form W-4 so they can ensure the proper amount of federal taxes are withheld. Employers may also be receiving many questions from employees who are looking for guidance. So let’s take a look at the new W-4, how it’s different, and how the changes impact employees and employers.

What is the Form W-4?

The W-4 is a form that employees complete and give to their employers to indicate how much money should be withheld from their paycheck for federal taxes. When employees fill out a Form W-4 accurately, this ensures they are not overpaying or underpaying on federal taxes during the year. According to IRS Commissioner Charles Rettig, the “primary goals of the new design are to provide simplicity, accuracy, and privacy for employees while minimizing the burden for employers and payroll processors.”

What’s the Difference Between a W-4 and a W-2?

It’s very common for people to mix these two forms up, after all, they are both used for tax purposes. Just remember, a Form W-4 is what an employee completes and files with their employer to indicate how much tax to withhold each paycheck. A Form W-2 reports earnings and deductions for the year and is what an employer provides to an employee for tax filing purposes.

How is the New W-4 Different Than the Old W-4?

The major differences between the old Form W-4 and the 2020 Form W-4 are the use of allowances and the elimination of exemptions.

In previous years, the monetary amount that an employee was allowed to deduct on their W-4 was tied to their personal exemptions; however, with recent legislation changes, personal exemptions were eliminated from the form altogether. To compensate, individuals that previously had exemptions now are allowed greater standard deductions and higher child tax credits.

How Does the New W-4 Affect Employers?

With the new W-4 format, your employees will be able to fill out the form more accurately than in previous years. This means the amount of money your employees receive in their paychecks will specifically reflect their life circumstances.

Employees that were previously confused by the W-4 and might have overpaid on their taxes now will see larger amounts of income on their paychecks, thus giving them greater satisfaction with their workplace as a whole. Happy employees lead to satisfied customers and greater business profitability.

What do Employers Need to Tell Employees About Form W-4?

The American Payroll Association has published a sample letter that employers can use to explain Form W-4 changes to employees. Ultimately whether or not your employees should be filling out the new W-4 in 2020 depends on their hire date and withholding certificate.

How Does the New W-4 Affect Employees?

With the new W-4 format, your employees will be able to fill out the form more accurately than in previous years. This means the amount of money your employees receive in their paychecks will specifically reflect their life circumstances.

Because the new Form W-4 uses simplified text for explaining how to fill out each section, completing a W-4 is now much easier. As a result, employees can now fill out the Form W-4 more accurately, and the IRS can better evaluate each individual’s withholdings. This can keep employees from having a large tax balance due each year, or it can help prevent employees from paying too much into their taxes each year, leaving individuals with more money in their pockets.

Popular posts

My favorites

I'm social

0FansLike
0FollowersFollow
3,589FollowersFollow
0SubscribersSubscribe