In 2020, the IRS revised Form W-4, the Employee’s Withholding Certificate that all business owners use to determine how an employee's federal income taxes should be withheld. In the event of a change in an employee's filing status (such as a marriage), Form W-4 should always be updated, even if the change occurs mid-year. We'll show you how!
What factors can impact an employee’s tax withholding?
The amount of taxes withheld from any given paycheck can depend on factors that can change from year to year. These factors include, but are not limited to:
- Gross wages and pre-tax deductions
- Pay frequency
- Marital status
- Multiple jobs
- Other income
- Extra withholding
When in doubt, it’s best to speak to a tax professional or consult Publication 15-T when filling out the W-4. The IRS has also provided a tax estimator to assist employees with their Form W-4 selections.
What we'll cover
- Filing status
- "Only 2 jobs"
- Dependents amount
- Other income
- Extra Withholding
- What factors can impact an employee’s tax withholding?
- Updating an existing employee's W-4 information
- Other helpful resources
What you’ll need:
- The employee's completed Form W-4 ⤓ Download
- IRS Publication 501 ⤓ Download
- IRS Publication 15-T ⤓ Download
When adding a new employee, the updated Form W-4 will display by default.
IMPORTANT: Do not use Legacy W-4 for new employees
Using Legacy Form W-4
All employees hired on or after January 1, 2020 are required fill out the current Form W-4, revised in 2020
Use the 2020 W-4 when entering new employee information.
Employees hired before 2020
If you're new to OnPay, you may be entering the W-4 information of an existing employee into OnPay. If they were hired before January 1, 2020, they would have used the previous version of Form W-4. If this is the case, you should use the Legacy W-4.
Employee's filing status can be found in Box (c) of Step 1 of the Form W-4.
"Only 2 jobs"
Only select True if this employee has two or more jobs. If you are this employee's only current employer, choose False.
There are generally two types of dependents that an employee can claim:
- A child under the age of 17
- An individual, related or otherwise, that relies on you financially
For help qualifying an employee's dependents, refer to IRS Publication 501.
Add the two amounts from Step 3 of the employee's W-4, and enter the total amount under “Dependents Amount”. If the employee has no dependents, leave this field blank.
If the employee has additional income from another source, and taxes are not being withheld (such as interest, or dividends) they may choose to have you withhold additional dollars from their pay to cover any taxation they might face at the end of the year. Do not use this field to record any expected payment issued by you or your organization.
Record any itemized deductions here. If the employee is using the standard deduction, leave this field blank.
If the employee expects a tax change later in the year, or if they just want a bigger refund, they may choose to have a fixed amount of additional taxes withheld. This is different than "Other income" in that the employee chooses the exact amount of pay to be withheld, as many factors can impact tax withholding.
Updating an existing employee's W-4 information
If an existing employee wishes to submit their withholding information using the new Form W-4, you'll need to update their employee profile in OnPay, too.
Click on the employee's profile in your dashboard.
Tip: You can also view employee profiles in the Workers tab
Clicking on the Workers menu takes you to the "Employees" list. You can open an employee profile by clicking on their name.
Click Tax Withholding in the employee profile.
Click Switch To 2020 W-4 to re-enter the employee's information using the current Form W-4 using the instructions detailed earlier in this article beginning with Filing Status↑