Form W-4: All you need to know about the latest 2020 updates

Irrespective of the employers telling you your taxes, Form W-4 tells you exactly the amount of tax your employer is allowed to deduct from your salary and pay to the organization. Form W-4, which is also otherwise called Employee Withholding Certificate, tells the employer the exact amount of federal income tax that must be deducted from an employee's paycheck. Form W-4 has been redesigned in the year 2020 which is why it looks different in its appearance and no longer describes allowances as one of its main features. This means that the employees will not be able to claim allowances.

What has changed in the form since the old form of 2016

One of the biggest changes that can be seen in this year's form is the exclusion of allowances from the form that baffled many people. Instead, You need to mention the amount per pay period, in case you want an additional amount withheld, or perhaps your spouse earns considerably more than you. Human Resources, however, is now letting the employees may not have the exact number with them that they used to fill out in the form on the first day of their job.

The previous version of the Form has had a Personal Allowance Worksheet that helped employees claim how many allowances they can claim. The more allowances you claimed in the form, the less an employer would withhold from your paycheck and the fewer you claimed, the more your employer would withhold. (Although the standard deduction nearly doubled with the Tax Cuts and Job TCJA, personal and dependent exemptions were eliminated.) The new form aims to make the process of determining how much an employer should withhold easier. It has five sections to fill out versus the seven sections that the previous version included. The new form also provides more privacy in the sense that if you do not want your employer to know you have more than one job, you do not turn in the multiple job worksheet.

What special consideration must be taken with the new Form W-4?

There is a slight alteration that can help you save some money when you start a job in the middle of the year and were not employed earlier that year. If you will be employed no more than 245 days for the year, request in writing that your employer uses the part-year method to compute your withholding. The basic withholding formula assumes full-year employment, so without using the part-year method, you’ll have too much withheld, and you’ll have to wait until tax time to get the money back.

Conclusion:

It is important to fill out your W-4 form correctly because the IRS requires people to pay taxes on their income gradually throughout the year. If you have too little tax withheld, you could owe a surprisingly large sum to the IRS in April, plus interest and penalties for underpaying your taxes during the year.