Navigating the New W-4

Back in January of 2020, the IRS published a new W-4. The new form does away with withholding allowances and instead allows employees to calculate a dollar figure for dependents, other deductions, multiple sources of income and additional withholding. While it seems quite a bit more involved, it is meant to provide greater accuracy.

Who needs to fill out the new W4?

All new employees must use the new form. Existing employees do not need to fill out the new form unless/until they want to make changes to their withholdings.

What does the new form ask?

It’s important to know that everyone must fill out steps 1 and 5. Steps 2, 3, and 4 should be filled out only if those sections apply, mostly commonly for those who have multiple jobs or who are married filing jointly and whose spouse work. 

What are the 5 Steps to the new W-4?

1. Enter personal information including indicating if you’re:

   1. single or married filing separately

   2. married filing jointly or a qualifying widow(er) or 

   3. head of household for those unmarried and pay more than half the costs of keeping up a home for yourself and a qualifying individual. 

2. Indicate if you have multiple jobs, if your spouse works or if you have other income. You can use the IRS’s Tax Withholding Estimator to help you determine the right figure to include. If you have more than one job, steps 3 through 4b should only be filled out on one W-4 form.

3. Claim dependents. Multiply the number of children under 17 by $2000 and the number of other dependents by $500. 

4. Make other adjustments, including:

   1. Investment and retirement income

   2. Deductions other than the standard deduction

   3. Extra Withholding - this one is especially important for members of the clergy in order to withhold enough to cover what the pastor will owe for SECA.

5. Sign the Form.

If you don’t fill out a form, your employer is required to treat you as single to take out the maximum amount of taxes. 

The IRS has published this handy FAQs on the 2020 Form W-4. Your Auxilio Partners Strategist is also available to answer questions related to the new W4. If you find you owe taxes or receive a large refund and want to adjust your withholdings, contact your Partner Strategist to make this change.