In December of 2019, the IRS finalized a redesigned Form W-4, Employees Withholding Certificate. Form W-4 is a federal form that is completed by the employee that indicates to the employer the amount of federal income tax to withhold. The revised form implements changes made following the 2017 Tax Cuts and Jobs Act, which made major revisions affecting taxpayer withholdings. The purpose of the newly redesigned W-4 is to provide a more simple and accurate approach to completing the form, while mitigating the workload that the employer assumes as a result of the form. It is important for employees to accurately complete Form W-4 based on their individual tax situation. If employees do not withhold enough during the tax year, this could result in a large tax liability with the filing of their tax return and potential underpayment penalties. If too much is withheld, this could result in a larger tax refund than necessary.
Employees who have submitted Form W-4 in any year before 2020 are not required to submit a new form merely because of the redesign. Employers will continue to compute withholding based on the information from the employee’s most recently submitted Form W-4. However, it is recommended to complete a new form W-4 when there are personal changes, such as the birth of a child, or financial changes, such as a new job, that would affect the elections made on the form. Beginning in 2020, all new employees must use the redesigned form.
As a result of changes made following the 2017 Tax Cuts and Jobs act, for 2020 the IRS has implemented a new 5 step process to complete Form W-4. One of the major changes to the new form is the removal of withholding allowances as these were directly tied to personal exemptions. In addition, they have added a new page to help taxpayers with multiple jobs complete the form. Form W-4 was redesigned based on the collective feedback of tax and payroll communities.
In addition, in prior years Oregon employees were able to use the federal Form W-4 to determine and claim Oregon withholding. However, due to federal tax law and form changes, the federal form no longer calculates Oregon withholding correctly. Form(s) W-4 that are submitted to your employer after January 1, 2020 can’t be used to calculate Oregon withholding. Instead, use Form OR-W-4 to help you calculate allowances for Oregon income tax withholding. Form OR-W-4 can be found here.