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Integrity Data

2020 W-4 Compliance Updates


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IT’S HERE! The IRS has released the final W-4 for the 2020 tax year. Any employee that needs to make a change to their federal withholding effective on or after 1/1/2020 will be required to 2020 W-4 Compliance Updatesuse the new form. This form change has significant impact on payroll professionals and their employees. In addition, several states have had a historical dependency on the federal W-4. We have offered some guidance on what employers should do in 2020 and beyond regarding W-4 compliance.

The best place for payroll professionals to start with understanding the new W-4 is the “FAQ’s on the draft 2020 W-4”  published by the IRS. In addition, our blog on “IRS Releases “Final” Draft of 2020 W-4" has some great information. Our Dynamics GP customers will appreciate the recording of our most recent Payroll User Group where we went over the changes in Dynamics GP and some specific examples of how to update employee withholding in Dynamics GP based on the new W-4. Watch this video on-demand here. (You may wish to advance to minute mark 18:35 where we begin discussing the W-4 specifically).

You can also check out our blog - 2020 IRS Form W-4 - What You Need to Know.

One final piece of information that can be helpful to employers was published by the American Payroll Association. They have a Hot Topic on the “2020 Form W-4” which includes a sample letter for employers to explain the 2020 Form W-4 to their employees.

W-4 Usage at the State Level

To complicate this issue even further, many states have utilized the federal W-4 for state withholding calculations. Many of the states have provided minimal information as it relates to how employers should use the new W-4 for state calculations. Below is a summary for each affected state.

California
2020 Fed W-4
Only used when claiming exempt on FED W4 (not MSRRA)

Colorado
Continue to use 2019 Fed W-4
(Uses Allowances in State Tax Calculation)

Delaware
Continue to use 2019 Fed W-4
(Uses Allowances in State Tax Calculation)

Minnesota
No longer needed - all employees can use MN W-4MN

Nebraska
Nebraska has released their own tax withholding form

New Mexico
Continue to use 2019 Fed W-4
(Uses Allowances in State Tax Calculation)

North Dakota
Continue to use 2019 Fed W-4
(Uses Allowances in State Tax Calculation)

South Carolina
Continue to use 2019 Fed W-4
(Uses Allowances in State Tax Calculation)

Utah
2020 Fed W-4
(Does not use Allowances in State Tax Calculation)

In the end, W-4 compliance is a challenge that payroll professionals are forced to tackle. Integrity Data is your partner in payroll compliance and we’re here to help! Keep up with our blog for the latest on all things HR and payroll.

Written by Tom Franz, Client Engagement Director - Integrity Data

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