Form W-4, Employee’s Withholding Allowance Certificate

As an employer, nonprofit organizations need to have all of their employees complete a Form W-4, Employee’s Withholding Allowance Certificate to tell the organization how much tax to withhold from each paycheck.  This form should be completed by all new employees as part of the onboarding process.  Current employees can complete a new form at any time to change their withholdings.  Employees should complete a new W-4 for significant life changes such as a change in marital status, adding a child or a change in spouse’s job.  The more allowances claimed on the form by the employee, the less tax that will be withheld from the employee’s paycheck.  In addition to allowances, an employee can have an additional amount of tax withheld by noting the amount on the form. 

The IRS has issued a new W-4 for use in 2020 (currently in draft form).  All new employees hired after 2019 or employees hired prior to 2020 who want to adjust their withholding from paychecks dated January 1, 2020 or later must use the new form.  The new form reflects changes from the 2017 Tax Cuts and Job Act that went into effect in 2018, which increased the standard deduction, eliminated personal exemptions and caused many individuals to no longer be able to itemize.  Instead of basing the amount of withholding on allowances, the new W-4 considers multiple jobs, number of dependents, other income and deductions. 

Employees who have already submitted a W-4 prior to 2020 will not be required to submit a new W-4.  Employers can continue to compute withholding based on the most recently completed W-4; however, employers may want to encourage employees to check to see if they are withholding the correct amount of tax from their paychecks and complete a new W-4 for any changes.  You can ask all of your employees to complete a new W-4 but they are not required to do so.  The same set of withholding tables will be used for both the old and new W-4.  If an employee fails to submit a completed W-4 after 2019, they will be treated as a single filer with no adjustments. 

Posted by: Carrie Minnich, CPA