What Is IRS Form W-4?
IRS Form W-4 Explained
Form W-4 is required for all new hires. The information an employee provides on the form is used to determine the amount of withholding necessary from their pay each pay period. This information includes their tax filing status and possible deductions and credits they might claim when they eventually file their tax return for the year.
The IRS provides calculation tables and guidance on how employers should convert this information to dollar amounts to arrive at a worker's take-home pay.
What Is Form W-4?
The 2020 Form W-4 walks employees through a series of questions and steps designed to arrive at accurate withholding without relying on allowances. The form cites the employee's tax filing status, tax credits the employee is likely to claim, and deductions they're likely to claim, as well as a voluntary request to have additional money withheld.
The IRS changed the Form W-4 for the 2020 tax year and beyond. The 2020 version is titled “Employee’s Withholding Certificate." The previous W-4 required that employees calculate the number of withholding allowances they were entitled to, and it was called the "Employee's Withholding Allowance Certificate."
The old allowances correlated with claiming personal exemptions on the Form 1040 tax return, but exemptions were dropped from the tax code in 2018 under the Tax Cuts and Jobs Act (TCJA). Form W-4 was redesigned to accommodate this change.
Who Uses Form W-4?
Form W-4 is filled out by an employee for the employer's use in calculating income tax withholding. An employee can change the information on their W-4 at any time, but only once per pay period.
Types of Form W-4
|Form||What It's Used For|
|Form W-4||Employees' wages|
|Form W-4 (SP)||Spanish version|
|Form W-4P||Pension and annuity payments|
|Form W-4S||Employees' sick pay|
This is the basic W-4 form, appropriate for English-speaking employees.
Form W-4 (SP)
This is the same W-4 form, but it's in Spanish to make completing it easier for employees for whom English is a second language.
Form W-4P is for use in calculating withholding from pension and annuity payments.
Form W-4S is for use in calculating withholding from an employee's sick pay.
Where to Get a Form W-4
The IRS provides a Forms and Publications page on its website where all the various Forms W-4 can be downloaded.
What to Do If You Don't Receive Form W-4
An employer is required to base withholding on the single filing status with no other adjustments if they don't receive a completed Form W-4 from a new employee who begins work in 2020 or later.
You can continue to use the information from the version of Form W-4 that was used before 2020 for existing employees who previously provided you with that form. You can request that they complete a new form, but they're not required to do so.
How to Fill Out and Read Form W-4
Employees fill out this form and they should understand what to do with the information provided on it.
The process for calculating withholding changed when Form W-4 was redesigned. IRS publication 15-T for 2020 gives details on how to figure withholding based on both the pre-2020 Form W-4 and the 2020 Form W-4. New withholding calculation tables have been added to Publication 15-T for the 2020 calculation method. The publication includes these five tables:
|Table||Method||W-4 dated||Annual Wages|
|1 (Automated Systems)||Percentage||Any year||All|
|2||Wage Bracket||2020 or later||Up to $100,000|
|3||Wage Bracket||Before 2020||Up to $100,000|
|4||Percentage||2020 or later||All|
Start by selecting one of the tables above. Here’s an example using "Table 2: Wage Bracket Method for Manual Payroll Systems with Forms W-4 from 2020 or Later." You'll also need the employee's W-4 Form.
- Step 1: Use Worksheet 2 in IRS Publication 15-T to get an Adjusted Wage Amount.
- Step 2: Use this Adjusted Wage Amount with the table to find a tentative amount for withholding. You’ll need the pay period type and the employee’s filing status. Check whether the employee has checked the box in Step 2 of Form W-4.
- Step 3: Account for any tax credits from Step 4 of the W-4.
- Step 4: Add the amount in Step 3 to any additional amounts from Step 4(c) of the employee’s W-4. This is the amount to withhold from the employee’s wages for the current pay period.
Benefits of the 2020 Form W-4
The new form has more options for employees to get a more accurate withholding amount, which also means a more complicated calculation for the employer. You should include these possible options in your withholding calculations:
- Taking a second job into consideration when doing the withholding calculations; employees can do this by checking a box in Step 2(c).
- Adjusting for dependents based on income and the number of qualifying children and other dependents
- Increasing withholding for other income from which taxes aren't withheld, such as interest and dividends
- Taking deductions other than the standard deduction
- Adding an extra withholding amount to be withheld each pay period
- Form W-4 is completed by employees to provide employers with the information they need to calculate tax withholding from pay.
- You must use the 2020 W-4 form for all new hires in 2020.
- Existing employees aren't required to complete the new Form W-4 unless they want to make changes to their withholding from previous years.
- IRS publication 15-T provides tables to guide you through the calculations based on an employee's W-4 information.
NOTE: This information is a general overview. The actual process will depend on your business situation and the individual employee information on the W-4 form. If you haven’t already given employees information about the changes in withholding, you might want to give them a link to a withholding estimator.
IRS. "Topic No. 753 Form W-4 – Employee's Withholding Allowance Certificate." Accessed Nov. 26, 2020.