The 2017 overhaul of the tax system eliminated employees’ exemptions for themselves and their dependents and introduced a new system for calculating federal tax withholding on wages. To accommodate this change and simplify the process, the IRS recently released a redesigned W-4 form and a new online tool to help business owners calculate their payroll taxes. Below is more information every business owner should know about the redesigned form before hiring new employees in 2020.

A Guide to the Newly Redesigned W-4 Form

Changes to the Form

The elimination of the exemptions previously claimed by employees went into effect on January 1, 2020. To calculate an employee’s withholding, the new form asks for information designed to help workers more effectively calculate their withholding. For instance, they may enter additional income from which payroll taxes may not be withheld, reducing the chances they’ll have to pay at the end of the year.

Who Should Use the New W-4

Current employees who already have a W-4 on file don’t need to submit another form, although they should consider recalculating their withholding in light of the new rules. Any employee hired after January 1, 2020, should fill out the revised W-4 so employers can accurately calculate their payroll withholding.

New Tools For Employers

Calculating withholding is one of the most time-consuming components and confusing parts of payroll, and the new rules can make the process even more frustrating. To help employers determine the correct amount of federal income tax to withhold, the IRS has launched the Tax Withholding Assistant for Employers. This spreadsheet contains built-in formulas that will calculate your workers’ withholding, reducing confusion and potentially serious errors.

Preparing payroll and navigating the complexities of the constantly changing tax code can be difficult and time-consuming, which is why businesses throughout the Lewisburg, PA area trust Donna J Troutman CPA PC to handle the details. Their accountants have over 30 years of experience working with companies in a variety of industries and a reputation for delivering reliable results. Visit their website to learn more about how new tax laws can affect your payroll preparation or call (570) 523-7337 to discuss your needs and make an appointment.