The personal allowances found on Form W-4 is a way to increase or decrease your tax withholding. As a general rule, the more allowances you claim, the less tax is withheld and vice versa. It is normal for you to be used to this on Form W-4 since it has on the form for many years.
Unfortunately, in 2020, you won’t be able to claim any allowances on Form W-4. The newly issued W4 Form removed the allowances altogether. Instead, you will have to detail your tax situation on the form. The information you’ve given on the Form W-4 will determine how much tax will be withheld.
Your tax withholding is now based on anticipated tax deductions and credits, multiple jobs if you hold any, spouse works, and adjustments you make to your income and withholdings. So allowances are no longer a thing. However, you can think of the changes as a replacement rather than a whole big change.
The worksheet in which you used to determine how many allowances you should claim already asked the information above. Therefore, it shouldn’t be a hard task to fill out the renewed Form W-4. If you as an employee don’t fill out a Form W-4 and hand out to your employer or the payroll department of your workplace, then the highest single rate will be effective in your tax withholdings.
This means if you have dependents, more tax than necessary will be withheld from your every paycheck, resulting in a tighter cash flow. So make sure to fill out a tax withholding form W-4.