Drawing on input from payroll professionals and taxpayers, the US Department of the Treasury and the IRS released a new design for the Form W-4, Employee’s Withholding Allowance Certificate, for calendar year 2020. Yes, it’s one more thing on the tax-time to-do list. But, according to Apex HCM’s Vice President of Product Management, Wes Muschara, it’s also “an opportunity for payroll service bureaus to be a consultative partner versus just another vendor.”
Form W-4 is the certificate completed by employees that helps employers determine the correct amount of federal income tax to withhold from workers’ wages. While it’s had a relatively consistent format for years, the 2017 tax reform legislation, which decreased the individual income tax brackets and removed personal exemptions, created confusion for employers on the application of new withholding tables. The IRS set out to address concerns with a revamped form, created in part from public input by key groups, including payroll industry professionals.
The result is a simpler and more straightforward form that provides options tailored for individuals with multiple jobs and for households with only one job. Just two steps are required for all employees: Step 1, where an employee enters his or her personal information, and Step 5, where the employee signs the form. Steps 2-4 of the revised form, if applicable, allow for further withholding to more accurately match tax liability. The new draft also provides employees with more privacy than the prior draft, which requested information about other forms of income, other jobs, itemized deductions and credits that employees may not have wanted to share with employers.
Savvy payroll software and service firms will be ready to answer an influx of questions over the next few months. Clients undoubtedly will need to know just how the new Form W-4 impacts new and existing employees, how they should prepare, what questions they’ll likely hear from employees and how much additional time it might take to have affected employees complete the forms. The time to begin proactive engagement with payroll clients?
“Right now,” Muschara says. “It’s not a major undertaking by any stretch. But payroll service bureaus should educate their clients in the November/December timeframe, then expect to see an increase in call volume in January.”
Apex HCM offers a range of tools for your payroll service bureau, including a user-friendly, highly customizable payroll software platform that seamlessly integrates with a robust suite of additional HR and time and attendance technology solutions. Call 878-645-3150 or contact Apex HCM online to learn how.