Comply With IRS Form W-4

Key Points

  • An employer must use IRS Form W-4 to calculate the amount of income tax to withhold from each employee's pay. The IRS completely redesigned Form W-4 starting with calendar year 2020 to comply with changes made by the 2017 federal tax reform law.
  • On previous versions of the form (i.e., 2019 and earlier years), an employee's income tax withholding was determined by the number of withholding allowances the employee indicated on the form and the employee's tax (or marital) status. However, the new form includes five steps and an employee's income tax withholding is determined based on the employee's tax status and adjustments (allowances have been eliminated).
  • Because the changes to the form are so extensive, an employer must know which employees it is required to provide the new form to, how those employees should complete the form, and how to use the information provided by each employee on the form to determine proper income tax withholding.

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