Knowledge Base

Form W4 Redesigned for 2020


IRS Form W4 is to be completed by each employee to communicate to the employer their tax filing status and preferences. For many years, the form simply provided the employee a place to claim a number of dependents (withholding allowances) and specify an additional amount of Federal tax to withhold from each check.

December 5, 2019 saw the release of a redesigned Form W4 for use starting in 2020. The new form allows much finer controls of the employees' tax preferences and also changes the tax withholding calculations.

The updated form can be found on the IRS website at https://www.irs.gov/pub/irs-pdf/fw4.pdf. There is also an FAQ document at https://www.irs.gov/newsroom/faqs-on-the-2020-form-w-4.

It is not required that all existing employees complete a new W4. The 2019 and prior forms remain functional. Only new employees hired in 2020 and beyond are required to complete the new form. PowerChurch Plus Versions 11.5 and 12 have been updated via Maintenance Release to allow the information from the new W4. Prior versions are no longer under maintenance and won't be updated with these changes.

Below is an example of a before and after scenario, using Allen Cunningham, one of the First Church employees in the PowerChurch Plus demo data.

Allen is nearing the end of his first year of employment at the church. He works part-time, around 25 hours per week, as the Custodian. Allen has a full time job and his wife Lara also works full time. When he completed his form W4 earlier this year when he started working at the church, he set it to claim one dependent, his infant daughter Rebecca, the same way he did on the W4 he completed at his full time job.

https://www.powerchurch.com/images/2020/2019-W4-PC2.PNG

This info was then entered into PowerChurch as shown below.

Unfortunately, because of that one dependent, Allen's annual income at the church falls into the bottom tax bracket, where 0% is deducted.

Fearing that he would end up owing tax at the end of the year, Allen found the Tax Withholding Estimator app on the IRS website at https://apps.irs.gov/app/tax-withholding-estimator-2019 and completed it.

After adding the annual income from the church to that of his full time job, then adding the income from Lara's job, the estimator shows that they can expect to be $504 short on their annual Federal tax withholding. This means they will indeed owe money at the end of the year.

To have an extra $504 in taxes taken out over the course of the year, Allen would need $19.38 in Federal Withholding taken out of each paycheck. To make this change, he needed to complete a new W4 form for 2020, requesting $20 of additional withholding.

https://www.powerchurch.com/images/2020/2019-W4-PC1.PNG

The new W4 info was entered into PowerChurch as shown below.

https://www.powerchurch.com/images/2020/2019-W4-PC1.PNG

As you can see below, the new $2,000 per child dependent credit still put Allen into the lowest tax bracket, where 0% would have been deducted. The additional $20 withholding will be processed, though and that should keep the Cunningham family from having to pay additional tax when filing next year.


Keywords:
W4, 2020

Created: 12/13/2019
Last updated: 12/26/2019