We appreciate all of our clients and we are honored to be able to help you navigate our current business environment. We want to update you regarding some significant changes to the W-4. As you know, you are required to get one from each employee. The old W-4 was simple. The new one they are proposing is very different. The IRS website claims that “The new design reduces the form’s complexity and increases the transparency and accuracy of the withholding system.” (irs.gov). In essence, they want you to withhold the exact amount of money from your check, so you will owe $0.00 with your tax return.
The new form (https://www.irs.gov/pub/irs-pdf/fw4.pdf & attached) will ask the employee to disclose information they never reported before. Employees will enter:
- Income from other jobs
- Spouses Income
- Earnings from Investments
- Retirement Income
We could take time to tell you how much we disagree with this change in the W-4 but that would not be as helpful as telling you the things you need to know and how to prepare. Your current employees and new hires before 12-31-2019, can continue with their current deduction calculations on their paychecks. Employees hired on or after 01-01-2020, will need to complete the new W-4. We recommend you ask all of your current employees to complete a 2019 W-4 before the end of the year. That way they are up-to-date and can be grandfathered in. Any address changes, etc. they will need to complete the new W-4 and will have their payroll checks calculated on the new tax table.
Beginning in 2020, if a new employee doesn’t submit a W-4, they “will be treated as a single filer with no other adjustments. This means that a single filer’s standard deduction with no other entries will be taken into account in determining withholding.” (irs.gov)
When an employee needs a W-4 direct them to the IRS website, where they can find a tool to help employees calculate their W4. You can find it here: https://www.irs.gov/individuals/tax-withholding-estimator. Use this tool to plug in numbers on the form.
For employees with a simple tax situation, know that they only have to complete:
- Step 1 & Step 5 on the new W-4.
This new form will require you to adjust your administrative side of your office. You must give them the new form and a link to the tool so they can calculate their W-4 properly.
For those clients that use us to complete their payroll, we will be prepared to process your payroll under the, soon-to-be, 2 standards of calculations for payroll processing. We will need your help to get us the new W-4 from the employees.
Also, any clients that would like for us to begin doing their payroll for them now that things will be even more complex, please let us know and we would be happy to help you. Also, remember that we have a Human Recourses portal that you can use for $50.00/month to help answer all of your HR questions as changes like this occur.
Please contact us if you have any questions.