As the New Year rapidly approaches, Jamal Ayyad, small business tax expert at SurePayroll shares some vital information small business owners need to know before 2020 begins.
The 2020 Form W-4 has been redesigned to comply with employee withholding requirements in the Tax Cuts and Jobs Act (Tax Reform). The form eliminates confusing worksheets and instead uses a 5-step process to more accurately determine the amount of employee withholding. Withholding allowances have been eliminated and replaced with fields to account for employees with multiple jobs, additional (non-job) income, dependent tax credits, and deductions. Options to add extra withholding or claim exemption from withholding remain unchanged from previous years.
New employees and employees changing their withholding for 2020 are required to use the new form, but employers cannot force existing employees to do so. The 2019 Form W-4 will still work with the new tax tables, although it is recommended that existing employees complete a new form to ensure the correct withholding for 2020. One important consideration for HR/payroll departments is that they may want to let employees take the form home rather than complete it on their first day as is customary, because tax information is required that the employee might not have readily available.