January 10th - In This Issue:
2020 REVISED W-4 HAS BEEN RELEASED
 

Effective January 1, 2020 all W4's completed by employees must be completed on the new W4 issued by the Internal Revenue Service.  The form is available at the link below, on the "FAQ & Resources" Page of my website and in the "Employee Forms" section of QuickBooks if you have a payroll subscription.

You are not required to have existing employees complete the new W4, only new employees need complete the newer form.  However, if the employees choose to complete a new W4 to reflect changes they need in their withholdings, they will be required to complete the new W4.

The IRS has also released an online calculator that we have featured several times in this newsletter beginning with the summer of 2018.  The Income Tax Withholding Assistant (or FITW Estimator) is covered in the next section.

The goal of the new W4 is to help employees more closely determine their withholding status so that the amounts withheld will better reflect their annual tax liability.  If properly completed the goal will be for the employee to have minimal tax refund or tax due when they file their annual tax return.  


2020 W-4    

USE THE NEW IRS FITW ESTIMATOR NOW!
 



The IRS has been encouraging taxpayers to use the new "Tax Estimator" since mid 2018 and we have featured this link in quite a few of our newsletters.  

It is now a very important requirement and the IRS is reaching out to employers and employees alike when they see a situation where taxes are not being withheld properly.  Since late October we have seen quite a few letters hitting mailboxes and the IRS is now imploring employers (via the new 2020 W-4) to force the use of the estimator.  

In Step 2: of the 2020 W-4 which is the section for "Multiple Jobs or Spouse Works" you are required to either (a) Use the estimator OR (b) Use the Multiple Jobs Worksheet on page 3 of the W-4 OR (c) If there are only two jobs total, you can check a box in this section.  The TIP: on the form says "To be accurate, submit a 2020 Form W-4 for all other jobs.  If you (or your spouse) have self-employment income, including as an independent contractor, use the estimator.

Here's how it works. It will be difficult for the employer to complete this process for the employees.  For most people, the Tax Withholding Estimator requires only 10-15 minutes. Users should have at hand the most recent pay stub for themselves and/or spouse and their personal information as well as last year's tax return.  
CHANGES TO PAYROLL IN QUICKBOOKS
Menu and Form Changes

There are changes within QuickBooks to accommodate the changes to payroll forms and the 2020 W-4 changes.  

If you have a payroll subscription and process your payroll through the QuickBooks software, there is an " Employee Forms" menu option under "Employees".  You will note that there are now 2 forms for W-4.  There is a Federal W-4 2019 and Prior and a Federal W-4 2020 and Later.  Needless to say, all new employees from this date forward would need to complete the Federal W-4 2020 and Later form.



When setting up a new employee you will see similar changes in the "Taxes" section of the Employee Setup screens.  If a current employee completes the Tax Estimator and needs to make changes, they will fill out the 2020 W-4 and you will change the Form to "2020 and Later" and then change the Allowances.

  

HOW TO INTRODUCE CHANGES TO EMPLOYEES



A well prepared letter with links for the employee to review the IRS site as well as a copy of the new 2020 W-4 are a great way to introduce the subject to employees.  Attached you will find a  Sample Letter released by the APA (American Payroll Association) and recently published in a PayPro Newsletter that you may give to your employees.  This is a Word Document that you can edit as needed to share this new information with your employees and help them find the right withholding for their personal tax situation.

If you as an employer receive one of the above mentioned letters from the IRS regarding one of your employees, you will be directed to immediately change their withholding status to Single and Zero Allowances.  I would follow the instructions.  The employee letter I've seen instructed the employee to complete the Tax Estimator and then advise their employer of the change needed.  This would of course necessitate the completion of the new 2020 W4 for the employee files.

All documents, including the Sample Letter for employees can be pulled from the FAQ & Resources page of my website.  





Cheryl Nance
                               clnconsulting.com

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