Employee’s Withholding Allowance Certificate

The Internal Revenue Service replaced the Employee’s Withholding Allowance Certificate with Employee’s Withholding Certificate. This change meant the allowances on Form W4 is no longer a thing. Instead of claiming allowances based on a series of information, the information needed to determine allowances is now going to be entered on Form W4.

This means a lot more than just a replacement though. In previously issued Forms W4, the employee could claim more allowances than he or she needed. This would result in employers withholding less tax than needed from the employee’s salary. As a by-product of that, the employee would owe to the IRS. With the new Employee’s Withholding Certificate, this is no longer an issue. Since employees need to enter their information directly, the withheld tax is more accurate.

Form W4 Changes

The IRS referred to the changes as β€˜to increase transparency, simplicity, and accuracy of the form. In the past, the value of a withholding allowance was tied to the amount of the personal exemption. Due to changes in law, currently you cannot claim personal exemptions or dependency exemptions.’

With that said, from 2020 and onward, all employees who fill out Form W4 will no longer claim allowances. Instead, enter information on their anticipated tax return and other income they want to withhold tax for or any extra withholding amount. These changes surely mean taxpayers will withhold tax at a more accurate level, thus, not owing to the IRS when filing a tax return.

Other than the employee’s tax withholding form, the employers must figure out the necessary tax withholding accurately. This is as crucial as the employee filling out Form W4. So both the employee and the employer must do their part accurately to avoid withholding too much or less tax.

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