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BUSINESS Thursday 6 February 2020
A25

What for W-4? Why you should care about the new tax form

By SARAH SKIDMORE SELL Ideally, people update
AP Personal Finance Writer their tax withholding in-
If you are starting a new job formation after major life
this year, or just want to up- events, such as marriage,
date your tax information divorce or the birth of a
with your employer, some child. Additionally, anyone
of the paperwork is going who was unhappy with
to look different. A lot dif- their results at tax filing time
ferent. last year should consider
The IRS has introduced a updating their paperwork.
new Form W-4 that must A number of people were
be used by all employers surprised to see a smaller
in 2020 to better accom- refund, no refund, or to dis-
modate recent changes to cover they owed money to
the tax law. the IRS at tax time. In part,
The overhaul of the form is this was because of inac-
the biggest in decades and curate withholdings. After
makes a once quick exer- the law was passed, the
cise a bit more involved. IRS updated its withholding
In return, according to the tables and urged taxpay-
IRS, it will yield more accu- ers to update their W-4s as
rate results. That is particu- needed, but few did.
larly important as the new Employees who are happy
tax law led to surprises for with the amount of taxes
some folks last year, due in withheld from their pay-
part to improper withhold- check do not have to do
ings. This Wednesday, Feb. 5, 2020 photo shows the W-4 form in New York. The IRS has introduced a new anything.
Form W-4 that must be used by all employers in 2020 to better accommodate recent changes to
So the new form is worth the tax law. WHERE TO GET HELP
a look, regardless of how Associated Press If you are confused, check
long you have been on out the IRS website. It has
the job. The more accurate information and sign the want to disclose that they have a large refund. a useful Q&A on the new
your W-4, the more accu- form. For some people, that have a second job or share "While the updated form form. The IRS Withhold-
rate your withholdings are. will be it. The other steps their spouse's income in- may initially elicit some con- ing Estimator is particularly
Withhold too little and you'll are optional but can help formation, there are work- fusion for employees, these helpful, walking employ-
owe money at tax time a taxpayer get more accu- arounds. The easiest is to important changes will ulti- ees through the process
and possibly face a penal- rate results, says Alice Ja- use the IRS Tax Withhold- mately simplify the ability to — something new and ex-
ty. Withhold too much and cobsohn, senior manager ing Estimator at www.irs. set and adjust withholdings isting workers should con-
you may be due a refund of government relations for gov/W4app to determine to achieve desired results," sider.
— which means you missed the American Payroll Asso- how much your household said Pete Isberg, vice presi- Your human resources or
out on that money all year. ciation needs to withhold and en- dent for government affairs payroll department can di-
Ideally you should break Step 2 asks employees to ter that total lower on the at ADP. rect you toward helpful in-
even. provide information about form. WHO NEEDS IT formation but cannot pro-
Here's what you should all the income in their Step 3 is for claiming any Not everyone needs to fill vide advice. If you need
know: household if there are mul- dependents, which are out the new form. additional help, consult a
WHAT'S DIFFERENT tiple jobs. This applies if the generally consider those In general, only new hires tax professional.
Say goodbye to allowanc- employee has more than who are under age 17 and are asked to fill out a W-4. "Perhaps initially it is going
es, the backbone of the one job or if both spouses living with you more than But anyone who wants to to be difficult for people
old W-4. work and file taxes jointly. half the year. You'll need update their information because it is a change,"
Employees used to answer Employees can use an on- to complete an additional with their employer will said Jacobsohn. "But I sus-
a series of questions to ar- line calculator or worksheet worksheet if you have oth- need to use it and experts pect over time it will make
rive at a number of "allow- to arrive at the correct er types of dependents to say many of us should. it easier for people."q
ances." The allowances amount, or they can simply claim.
were based on personal ex- check a box if the pay at And Step 4 is where you
emptions — essentially how both jobs is roughly equal. can make any adjustments
much income was exempt Payroll company ADP for other income, deduc-
from tax based on how warns of a potential mis- tions or optional withhold-
many people were depen- step here: if you have two ings. This includes reporting
dent on the employee. But jobs or are in a two-earner other forms of income such
the new tax law did away household and check this as dividends or withdrawals
with personal exemptions, box — do so on the W-4s from retirement accounts.
so the IRS had to change its for both jobs. But only com- There is also an option to
approach. plete steps 3 and 4 on one enter a set amount of ad-
The form now collects in- W-4 to ensure the proper ditional money to be with-
formation about all the amount is withheld. held, including those who
income in an employee's If an employee does not simply want to ensure they
household, as well as de-
pendents, to calculate
how much to withhold.
THE DETAILS
The form is five steps long.
Steps 1 and 5 are manda-
tory — fill out your personal