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Guide to the new 2020 W-4 Form

Guide to the new 2020 W-4 Form

Welcome to 2020! It is a new year and that means it’s time to think about your money and taxes.  

Should you consider completing a new W-4 Form? The W-4 form is an important document that you complete when you start a new job. This form tells the payroll department how much to withhold in federal taxes from your paycheck. Usually you complete it and forget about it, until you have a large balance due on your tax return and you ask what happened!

You may think about changing your W-4 when you get married or have a new child, but otherwise many people don’t ever think about the W-4. When you filed your 2018 tax return did you owe a larger than usual balance? Did you change your W-4 last year to fix that problem?

What’s New on the W-4?

The new TCJA law made sweeping changes to your taxes and unfortunately the W-4 Form is not as simple as it used to be. The new tax law eliminated all exemptions on your personal tax return so claiming Married with 4 exemptions no longer makes any sense. As a result, the 2020 Form W-4 no longer uses allowances. The IRS says that this change is meant to increase transparency, simplicity and accuracy of the form. However, you need to understand your tax return in order to accurately complete your W-4 Form.  

The redesigned Form W-4 makes it easier for you to have your withholding match your tax liability. But if you prefer to have the government act as your savings account and you want a refund when you file your tax return, you will need to add an amount on Step 4(c) the additional amount you would like your employer to withhold from each paycheck. This will increase the funds withheld from each paycheck so that you get that money back as a refund when you file your tax return (keep in mind though you do not earn interest on the amount you overpay). 

You should fill out a new W-4 Form if the following applies to you:

  1. You are married and both you and your spouse work.
  2. You have several jobs or you added a part time job to your regular employment.
  3. You added a new dependent.
  4. You have other income on your tax return that is not covered by withholding.
  5. You owed on your 2018 return and you never made a change to your W-4.

The Form W-4 has five steps to complete:

  1. Enter personal information including name, social security number and address.
  2. If you have multiple jobs or two spouses work, the chance that you will be underwithheld is much higher. If this applies to you, we recommend that you claim Single on Step 2 so that the computation for your withholding only uses half of the standard deduction.
  3. Do you qualify for the $2,000 child credit? If your income is below $200,000 ($400,000 for married filing joint) and your dependent(s) are less than 17 years old, you likely do get that additional credit. You can enter a number for each dependent under age 17 on Step 3 line 1. If your income is below the thresholds and you have dependents age 17 and older than you can enter a number on Step 3 Line 2. If you are unsure if you will qualify for any of the child credit, you can leave this step blank. For example, if you share custody or claim dependents every other year.
  4. A. You can add additional income from a business, rental, investments for retirement accounts. If you add this income on Step 4 line (a) you will have taxes withheld from your paycheck to cover this income.    B. If your deductions are much higher than the standard deduction you can adjust for this on Step 4 Line (b). For example, if you have large medical expenses, mortgage interest or charitable contributions you may need to enter a number on this line.  Look at your Schedule A on your Form 1040.  C.  You can skip 4 (a) and (b) and just enter an amount in line C that you want to add to your federal withholding each pay period.
  5.  Sign the form and return to your employer.


State Withholding

If you work in Oregon and you change your Federal W-4 Form, you will need to complete a separate  New Oregon Form W-4

In the past, most Oregon employees used federal Form W-4 for Oregon withholding purposes. However, beginning January 1, 2020, any changes made to state withholding must be made on Form OR-W-4 as the new federal Form W-4 doesn’t use allowance and can’t be used for Oregon withholding purposes.

You can use your previous exemption type filing to complete the Oregon W-4.

Four helpful articles on the new W-4 Form for Employees and Employers