The Tax Cuts and Jobs Act drove significant changes to the 2020 Form W-4.
In a detailed, example-filled presentation, longtime payroll educators Sally Hilton, CPP, and Jim Medlock, CPP, explained the changes in the Congress Xstream workshop “Federal and State Tax Calculations With the 2020 W-4 Form” Friday morning, June 5.
Medlock, former Director of Education and Training for the APA and current Payroll Compliance Educator for Medlock and Associates, explained the origins of the new form.
“Why did the IRS make all of these changes to the 2020 Form W-4?” he asked. “It goes all the way back to December 22, 2017, when the Tax Cuts and Jobs Act was signed into law.”
For most employees, the form introduced four significant changes:
- Eliminating personal exemptions
- Increasing the child tax credit
- Increasing the standard deduction
- Reducing itemized deductions
“With the elimination of the personal exemptions, which we knew in payroll were synonymous with allowances, the W-4 needed to be changed,” he said.
Hilton, an APA Director of Payroll Training, noted that the new form is primarily for new employees.
“Did all employees need to complete a 2020 Form W-4?” she asked. “Of course, the answer is no, it is not a requirement. What we have to focus on is our new employees who are first being paid wages in 2020.” Current employees who are changing their withholding information on their W-4 must also use a 2020 Form W-4.
After going through multiple examples of how to fill out the form, Hilton offered advice on how to become familiar with the new document.
“It may not make sense listening to someone else walk you through the steps,” she said. “The best way for this to resonate, for the light bulb to come on, is to use your own pay statement, use the appropriate tax table, and use Worksheet 1.”
Lorie Ponder, CPP, took the advice to heart, writing in the chat, “I’m going back to work and having my team sit down and manually calculate some withholdings so they understand better.”
The instructors also addressed special requirements for nonresident aliens filling out the new form, as well as which states accept the federal form for state income tax purposes.
Their presentation was meaningful to the self-described payroll geeks who were following along and commenting in the chat. Many said they planned to watch it again to reinforce what they learned.
“This is so informative and clear, and the handout will help tremendously!” Angela Martin-Johnson wrote.
Michelle Imrisek, CPP, echoed her comment.
“This is one of the best presentations—love the handout, and calculations are my favorite!”
The presentation will be available until September 5 in Congress Xstream on demand.