Form W-4 is one of the few IRS tax forms that gets an update every year. The updates are mostly in the form of structural changes rather than how the tax withholding form is completed. But the latest change to the Forms W-4 for 2020 has brought some significant changes.
In previous years, taxpayers would use allowances to determine how much tax needs to withhold. Now, the allowances have been removed and instead of claiming them, you now have to detail the information you would use to determine how many allowances you needed to claim.
Changes in 2020
The overall changes increase the simplicity of the Form W-4 and kind of eliminates the pathway to withhold as little tax as possible. Technically, you could claim as many allowances as you want without any restrictions. The more you claimed the less tax would be taken from your paycheck. Also, the filing status option where you could select to withhold more tax is removed as well.
Related Article: Form W-4 2020 Instructions (updated)
Instead of selecting your filing status as “Married but withhold at a higher Single rate”, now you’ll enter the extra withholding in the 2020’s form. The change is significantly better and improves the accuracy of the Form W-4. One thing to mention about this part of Form W-4 is that you must enter the extra withholding amount for each pay period. Entering a monthly or annual amount will result in more withholding for that pay period than necessary.
Another notable change on Form W-4 is that if you work at multiple jobs and both jobs pay similar, check the box on Step 2. But only check the box if the pay is similar. If there is a big income gap between the two jobs, doing it will result in more tax than necessary will be withheld from your paycheck. In conclusion, the overall changes made to Forms W-4 is going to make the form more efficient and accurate for many.