The United States Internal Revenue Service has just released a draft of the new Publication 15-T to provide insight on withholding obligations for employers.
The draft contains a first look at the new steps’ employers will take to figure federal income tax withholding in the upcoming year (2020). It provides instructions on how to properly calculate withholding for Form W-4, as well as, examples of percentage and wage bracket method tables.
The publication also provides a 4 -step worksheet for employers on what the procedure may look like based on 2019 tax parameters. The basic steps include:
- Adjust the employees wage amount – subsections include steps to follow for employee who has provided W-4s from the previous year, and an employee who has not.
- Figure the tentative withholding amount – Two options: Wage bracket method, or percentage method. Tentative withholding amount based on employees filing status, adjusted wage amount, and if the box in step 2 of the 2020 W-4 has been checked.
- Account on tax credits – tax credit amount will be 0 if the W-4 is from the previous year.
- Figure the final amount to withhold – step calculates additional amounts requested by the employee for each pay period.
Form W-4 (Employees Withholding Allowance Certificate) has been redesigned to improve transparency and simplicity in order to create a more accurate withholding process. The forms purpose is to allow an employer to withhold the correct amount of income tax from an employee.
The steps for Form W-4 is:
- Enter Personal Data
- Account for Multiple Jobs
- Claim Dependents
- Other Adjustments
- Signature and Employer Section
Its best to become familiarized with the new method so mistakes wont be made. Best of Luck!
Global Payroll for the New World of Work
Cutting edge technology that streamlines your payroll in over 100 countries for EoR, contractors, and payroll workers.