Updated IRS FAQs on Form W-4

Last Updated on March 9, 2021 by G. T. HR

IRS FAQs on Form W-4:
Employee’s Withholding Certificate

Employers must have new employees complete a number of forms before they can begin their employment. The Employee’s Withholding Certificate is the new Form W-4, which is one of these forms. This Form was released by the IRS on December 5, 2020. W-4 provides employers the information they need to adequately set up a new employee’s filing status for payroll tax purposes. Form W-4 is published and updated by the U.S. Internal Revenue Service (IRS).

On Form W-4, employees can also declare the number of dependents, the tax credits and deductions they intend to claim. While this form is often used for new hires, employees can update the W-4 form they have on file with their employer whenever a change in filing status, dependents or other tax credits and deductions take place.

This Compliance Overview presents the answers the IRS has published in response to frequently asked questions (FAQs) related to Form W-4.


General FAQs

1.     Where can I download the new Form W-4?

About Form W-4, Employee’s Withholding Certificate

2.     Why redesign Form W-4?

The new design reduces the form’s complexity and increases the transparency and accuracy of the withholding system. While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.

3.     What happened to withholding allowances?

Allowances are no longer used for the redesigned Form W-4. This change is meant 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.

4.     Are all employees required to furnish a new Form W-4?

No. Employees who have furnished Form W-4 in any year before 2020 are not required to furnish a new form merely because of the redesign. Employers will continue to compute withholding based on the information from the employee’s most recently furnished Form W-4.

Employee FAQs

5. My tax situation is simple. Do I have to complete all of the steps?

 No. The form is divided into five steps. The only two steps required for all employees are Step 1, where you enter personal information like your name and filing status, and Step 5, where you sign the form. Complete Steps 2 – 4 only if they apply to you. Doing so will make your withholding more accurately match your liability.

6. What happens if I only fill out Step 1 and then sign the form?

 Your withholding will be computed based on your filing status’s standard deduction and tax rates, with no other adjustments.

7. When should I increase my withholding?

 You should generally increase your withholding if:

·       You hold more than one job at a time or you and your spouse both have jobs (Step 2) or

·       You have income from sources other than jobs or self-employment that is not subject to withholding (Step 4(a)).

If you do not make adjustments to your withholding for these situations, you will very likely owe additional tax when filing your tax return, and you may owe penalties. For income from sources other than jobs, you can pay estimated tax instead of having extra withholding.

8. When should I decrease my withholding? 

You should generally decrease your withholding if:

·       You are eligible for income tax credits such as the child tax credit or credit for other dependents (Step 3),or

·       You are eligible for deductions other than the basic standard deduction, such as itemized deductions, the deduction for IRA contributions, or the deduction for student loan interest (Step 4(b)).

Links and Resources

Form W-4

Form W-4 (Spanish)

All Form W-4 Revisions

FAQs on the Form W-4 

IRS Tax Withholding Estimator

About Publication 501, Exemptions, Standard Deduction, and Filing Information

About Publication 503, Child and Dependent Care Expenses

About Publication 505, Tax Withholding and Estimated Tax

About Publication 972, Child Tax Credit

If you have questions about the new W-4 or other questions about human resources for your small to mid-sized business, contact Chris Cooley at MyHRConcierge by phone at (855) 538-6947 or by email at ccooley@myhrconcierge.com.