The aftershocks from the new W-4 and updated withholding tables just keep on coming!
And they should give your payroll department some welcome clarity.
First, a key reminder: The regs make it clear that employees don’t need to fill out a new W-4 simply because there’s a new form.
But the proposed W-4 guidance does provide rules under which you, as employer, must require a new W-4 from an employee. (Encourage folks to use the new online calculator – IRS does, too.)
Who needs to fill out a new W-4
- An employee’s filing status changes. If an employee’s “married filing jointly” status changes to “single” (including “single filing jointly”) or “head of household,” the employee needs a new W-4. And the same holds true if someone’s status changes from “head of household” to “single.”
- Someone starts a second job. Employees who start another job and submit a W-4 for it with higher withholding rate tables must give the first employer a new W-4. And the same applies if a spouse does this and the couple files jointly.
- An employee with multiple jobs receives a big raise. When someone has multiple W-4s, completed one form using the multiple job procedures and expects to receive a raise of at least $10,000 a year, the employee must submit a new W-4 updating the multiple jobs procedures section to that employer.
- An employee can no longer claim a child for the tax credit. If someone claims the child tax credit and expects the number of qualifying children to change, you must receive a new W-4.
- Other tax credits can’t be claimed. Similarly, if the total amount of tax credits an employee can no longer claim exceeds $500, the person needs to submit a new form.
- The employee’s deductions change. Employees who expect the itemized deductions they claim on their taxes to decrease by more than $2,300 should fill out an updated W-4.
- A worker’s no longer tax exempt. Someone who now expects to pay taxes should give your company a new W-4.
And if they don’t, here’s withholding advice
Also, the new W-4 guidance clarifies that your company must now treat new employees who fail to furnish a properly completed W-4 as single and withhold using the standard deduction and no other adjustments.