How to complete new 2020 form W-4

Hey everybody, we've been getting a lot of questions about how to complete the new Form W-4 that goes into effect January 1st, 2020. So what I thought I would do is just do a quick screen share where I walk you through how to complete the form, what are some of the commonly asked questions, and then give you the opportunity to see it completed in person in action. Before we go into that, I just want to touch on the fact that people keep asking me, why is there a new Form W-4? Well, back in 2017, when we had tax reform going to place, this form was implemented as part of that and has made— gone through some iterations since then, ultimately to try to make it simpler for people to come out as a net zero at year end instead of either owing taxes or getting a tax return. So this process should make it easier and more accurate for employees of all different iterations. But in the short term, it's going to cause a little bit of confusion around who should complete it, what should they complete, and how to best do that. So I'm going to provide you with a quick overview today. I'm going to switch over to sharing my screen, and then if you have any questions, don't hesitate to drop me a note. I'll put my email in the comment section. Thanks for joining us. Let me switch over to the screen.

Walk through some of the changes with W-4. Uh, the first question we get all the time is, who needs to complete this form? It's anybody who's going to start employment in 2020, or anybody who is is already employed that wants to make the update. You cannot require your employees to update the W-4, but you can let them know what's happening and give them the option to update the W-4 so that they can make those changes and get more accurate tax. You'll see the accuracy level we're going to get to here in this tax withholding estimator. People are going to be able to get it down so they're so close to knowing exactly what they need to pay in for the year. Uh, it'll make tax time a lot easier for them with a little bit of work here at the front end of the year. And I would anticipate that if it's me as a, as a filer, I would want to probably do this every year to try to make sure that I was as accurate as possible going into year-end. And once again, you can't make people submit an updated W-4. You can let them know about it, and they certainly can do it. But anybody who's hired effective January 1st or after, you have to be using the new form. If they do not complete this new form, then it's going to default to the single filing, you as an employer will be required to have them do that. So as I go through this, let's take a look at the form here. Um, it's a simple 5-step form. One of the things you'll notice right out of the gate is that it's actually a full page now where it used to be kind of a half page, almost like a ticket. Um, now it's going to be a full page and it's going to have a lot of if this, then that sort of logic in it. And it's going to guide people to a calculator when need be to help them to figure out their exact situation. So step 1, Enter personal information. You know, the biggest thing here is keeping up with single or married filing separately, married filing jointly, head of household. Check only if you're unmarried and pay more than half the cost of keeping up a home for yourself and qualifying individual. Now there's some minor changes there to those classifications. You should get familiar with your own classification. Maybe talk to your CPA if you're not 100% sure. So step 1, Fairly straightforward. Step 2. So this is for folks with multiple jobs or their spouse works. You complete steps 2 through 4 only if they apply to you. So that's really important here. So to see if you're exempt from withholding or if you have concerns about your privacy, see page 2. Everybody must complete step 5, but instructions are on page 2. So if I bounce over to page 2 real quick, it's going to walk me through. Step by step. How do I use step 2? Use this step if you are— if you have more than one job at the same time or are married filing jointly and you and your spouse both work. Consider checking the box in step 2 if there are only 2 jobs in the household. So once again, specific situations. If you are going to do this, you should do one of the following. So first, the most recommended thing. This is highest for privacy level. You don't have to submit any information to your employer. So for example, if I have a second job and I really don't want my employer to know what I make at that second job, I have the option to just go ahead and complete this estimator, which is right over here, and I'm going to walk through that in just a second. Um, I can use the multiple jobs worksheet on page 3 and enter the result in step 4C below. And so that is a great option. It's not quite as accurate as Option A, but it's still much more accurate than Option C. Um, you can check the box and do the same on Form W-4 for the other job. It's accurate if you've got jobs with similar pay, uh, but Option A probably most accurate. So if you have privacy concerns, definitely choose A or B. If you and your spouse have income from self-employment, including as an independent contractor, choose A. 'Cause that's something that's really important to note is that even if it's going to, even if you're self-employed, your employer's not gonna be able to collect the Medicare and Social Security on that for your self-employment taxes. So let's go ahead and take a look at the tax withholding estimator real quick. Now I just went through this. This link is out there and I'll put it in the comments. You just kind of walk through this. It's almost like doing your taxes in TurboTax or something. You're just going straight through and it's asking you questions about how much income you earn, your situation, married, etc. And then it's going to give you a breakdown at the end, what your estimated tax withholding should be, which you're, or what you're, yeah, what you're actually getting taken out of your check, which your obligation is going to be, and then if you over or underpay based on what you currently have getting taken out of your check. So it's a really valuable exercise to let you know what you should do. So make sure you're having the right amount withheld to meet your tax obligation by using Next Year's Tax Withholding Estimator early in the year.. And you can see as I walk through this, it asked me a bunch of questions about me, how many dependents I have, what our income was between the two of us because I said married filing jointly, our two jobs, our net income, and, you know, asked about my spouse's job. And I just kind of filled these in with some dummy numbers just to be able to give you guys a little bit of a purview into that there. So great exercise to once again get very accurate withholdings on your W-4. Step 4, also optional. Do you have any other income? If you want tax withheld or for other income you expect this year that won't have withholding, enter the amount of other income here. This may include interest, dividends, and retirement income. You should not include any from other jobs in 4A. Deductions. If you expect to claim deductions other than the standard deduction and want to reduce your withholding, use the deductions worksheet on page 3. That's right here. So here's your multiple jobs worksheet. If you have 2 jobs, it's just going to walk you through once again some of those old school breaking it down into 1, 2, 3, 4, 5 is going away, getting a little bit more detailed with some of these deduction calculators. And if you want any extra withholding, any— enter any additional tax you want withheld each pay period. And now this is going to be your end result from some of these other calculations should you choose them. So once again, going to get very detailed, very accurate here. And if the employee does not sign off on this, once again, it's going to default to the single rate. So really great form here in reality. Now, as employers, what are we going to do with this? So we're going to enter this, these numbers into our payroll system. You'll start to see all the payroll systems getting more accurate settings for this. Now we're going to have to have two sets of settings inside of our payroll systems because we've got something for We've got something for 2018 or 2019 and prior, and then we've got the 2020 forms going forward, and we have people who could be on both technically. So a couple of things to look out for, you know, does everyone need to complete this? No, just your folks that want to and your folks that are hired after 2020. Employees can complete it if they want. You cannot require them to do it. But ultimately what you want to do is make sure that you've got a great system in place to track and enter this data into, both on the payroll side and during employee onboarding. If you need a great onboarding system, let us know. ERG has a wonderful system where we've completely automated this new W-4, allow your employees to log into the system, complete this information online, and submit it. If you have any specific questions about the form, let me know. Hopefully this video was helpful as just a quick walkthrough of the updated form. And what the estimators look like and some of the new things. So appreciate you very much. Let us know how we can help. Leave a comment below. Let us know. Thanks.