In December of 2019, the IRS released a new tool that might be very helpful to employers dealing with the updated 2020 Form W-4. Payroll professionals are getting questions from employees – “If I give you a new W-4, how will this affect the federal taxes withheld from my paycheck?” This can be a difficult answer without having an easy way to “What If” the calculation. Additionally, this tool can help give confidence to payroll professionals that the federal withholding calculated by a software system, or manually, is correct.
According to information on the IRS website:
“The Income Tax Withholding Assistant is a spreadsheet that will help small employers calculate the amount of federal income tax to withhold from their employees’ wages. It will help you as you transition to the new Form W-4 for 2020.
Use the Income Tax Withholding Assistant if you typically use Publication 15-T to determine your employees’ income tax withholding. If you use an automated payroll system, you do not need to use the Assistant.
The Tax Withholding Assistant is available in Excel format.”
How to Use the Tax Withholding Assistant
Open the Tax Withholding Assistant and follow these steps to calculate your employees’ tax withholding for 2020. Be sure that your employee has given you a completed Form W-4. The Assistant can accommodate both the 2020 Form W-4 and Forms W-4 from prior years.
You will want to save a separate copy of the spreadsheet for each employee.
- Indicate how frequently you pay your employee.
- Specify which version of Form W-4 applies to the employee.
- Enter the requested information from your employee’s Form W-4.
- Save a copy of the spreadsheet with the employee’s name in the file name.
- Each pay period, open each employee’s Tax Withholding Assistant spreadsheet and enter the wage or salary amount for that period. The spreadsheet will then display the correct amount of federal income tax to withhold.
Integrity Data is your partner in HR and Payroll compliance. We’re here to help! Have more questions on the W-4 or Publication 15-T? Check out our blog for more details.