2020 Form W-4 and Form W-4N

The 2020 Form W-4, Employee’s Withholding Certificate, is very different from previous versions.

A copy of the new form can be downloaded here:  https://www.irs.gov/pub/irs-pdf/fw4.pdf

An employer cannot require an employee to complete a new Federal Form W-4 if they received payment of their first wages on or before 12.31.19 unless the employee wants to adjust their withholding.

Who is required to complete a 2020 Federal Form W-4:

• All new employees whose first wages are paid on or after January 1, 2020
• Workers who want to adjust their post-2019 income tax withholding

Before completing the 2020 Form W-4, employees should read the instructions that are included with the form. The most significant change is that an employee no longer indicates the number of exemptions or withholding allowances on the form.

Employees must complete Steps 1 and 5. Steps 2, 3, and 4 are optional, but completing them will help ensure that the employee’s federal income tax withholding will more accurately match the employee’s anticipated tax liability.

• Step 1 is personal information including name, address and anticipated filing status;
• Step 2 is for households with multiple jobs;
• Step 3 is used to claim tax credits for dependents;
• Step 4 is for other adjustments (additional income such as interest and dividends, itemized deductions that exceed the standard deduction, and extra tax an employee wants withheld);
• Step 5 is to sign the form

The IRS takes privacy seriously and suggests that, if an employee is worried about reporting income from multiple jobs in Step 2 or other income in Step 4(a), the employee can enter an additional withholding amount in Step 4(c). To determine the additional withholding amount, the employee can use the withholding estimator www.irs.gov/W4App.  The worksheets are not to be filed with the employer

An employer’s treatment of newly hired employees who do not file a valid Form W-4 depends on when wages first are paid. New employees who are first paid wages in 2020 and do not provide a valid 2020 Form W-4 are to be withheld with a filing status of single with no adjustments on a 2020 Form W-4. This treatment includes employees hired in 2019 if the first payment occurs in January. Employees who are first paid wages before 2020 and do not file a valid Form W-4 are to be withheld with a filing status of single and zero withholding allowances on a Form W-4 issued before 2020.

The IRS has designed the withholding tables so that they will work with both the new and prior year forms W-4.  Most accounting systems will also work with both the new and prior forms.  Employers can reference Publication 15-T, Federal Income Tax Withholding Methods, a new publication that describes how to manually calculate withholding.

Please note: if an employee is not required to submit a new form and does not submit a new 2020 Form W-4, the employer should continue withholding based on the employee’s previously submitted Form W-4.

Common areas of confusion – 2020 Form W-4:

• Step 2(c)- If an employee is in a two-earner household and they opt to check the box in Step 2(c) both spouses should check the box on their respective Form W-4, but only one of them should fill out Step 3 and Step 4 of the form.
• Step 4 (b) - "deductions other than the standard deduction" - employees should ensure they enter expected deductions in excess of the standard deduction amount not their total deductions

For additional information, below is a link to frequently asked questions: https://www.irs.gov/newsroom/faqs-on-the-2020-form-w-4

Form W-4N

Nebraska introduced a state withholding certificate for use starting in 2020.  The state of Nebraska developed this form due to the significant differences between federal and Nebraska laws.

A Form W-4N is required to be submitted by an employee whenever the employee submits a Federal Form W-4 on January 1, 2020 or later. 

If an employee has not submitted a valid Form W-4N when required, the employer must withhold at the highest State of Nebraska tax rate, 6.95%, as if the employee was single with no allowances.