With 2020 comes a brand new W-4 Employee's Withholding Certificate from the IRS. This form is used to give you a chance to tell you how much tax to withhold from each paycheck. So what do you need to know about the IRS' new form? Let's dig in.
The first thing to know about the new W-4 is that it asks questions your employees may find intrusive and hesitate to answer. Questions like how much money your spouse makes, if you have a second job, and how much you make from your "side hustle." The new W-4, in accordance with new tax codes, will require both old and new employees to disclose this information. You may never have thought of asking these questions, but it seems the IRS wants you to start.
So, what if your employees don't want to share this information? They may be glad to hear that they have a few options. First, they can be selective about what they fill out on the form, if anything at all. No employee, old or new, is legally required to complete the W-4: they are allowed to fill out only their name, address, filing status, and Social Security number.
But why is the IRS asking these questions anyway? In short, the government wants to increase the accuracy of withholdings to reflect the changes that came with President Trump's 2018 tax reform. If you and your spouse file jointly or if you have a side hustle that pays significantly less than your primary job, the new tax code can lead to too much tax being withheld--the IRS wants to prevent that.