New 2020 Form W-4 reflects its first major redesign in decades

Employees who begin a new job or want to make changes to their federal tax withholding will have to provide these updates on an all-new W-4 form, starting on Wednesday.

The revision that will take effect on Jan. 1, 2020, has been crafted to reflect changes from the federal Tax Cuts and Jobs Act that took effect last year. The IRS said the changes “reduces the form’s complexity and increases the transparency and accuracy of the withholding system.”

The Form W-4 allows your employer to withhold federal income tax from your paycheck. If too little is withheld, you will generally owe money when you file your return, likely owing a penalty to the Internal Revenue Services. But, if too much money is withheld, you will generally be due a refund from the IRS.

The updates, which are part of the first major redesign to the Form W-4 since 1987, should allow fewer big refunds or balances due at tax time.

For each person in the household, employees will not be asked how many “allowances” they want to claim – the first time in decades. Also, the form will ask employees to make a calculation if they have a second job or a working spouse unless the marriage partner earns around the same income.

Outside income can be voluntarily added on a new line to record items such as investments or pension income, for instance, if the person chooses to have tax withheld from his or her paycheck to cover, rather than making quarterly estimated tax payments.

For those worried about alerting the IRS to an item like a second job, for example, there is also a tax withholding estimator on the government agency’s website to determine how much they may owe.