The redesigned form takes into account that there are no longer dependency exemptions. It also makes adjustments for other income and child tax credits.

It’s very simple for single taxpayers with no other income or dependents. Check the single box and you’re done.

For dual income families:
1. If earnings are about equal, you can check the box in Step 2(c). Both spouses should do the same.
2. If the earnings are greatly different, you may want to complete Steps 2, 3 and 4 on the W-4 of the HIGHER wage earner only. Use the IRS estimator at www.irs.gov/W4App or complete the worksheets in the instructions and transfer those results to page one.
Checking the box in Step 2(c) will increase the amount of your withholding.

Step 3 accounts for any child tax credits you’ll be getting. So if you’re counting on these as a “bonus” in the form of a tax refund, you might not want to check this box. You might also reconsider giving the government an interest free loan.
Including an amount in Step 3 will reduce the amount of your withholding.

Step 4 will dial in even more specifically for filers with other income and spouses with dual income. Follow the worksheets in the instructions using your best estimate for 2020 income and deductions, then transfer the numbers onto page one.

If you don’t want to reveal that you have a second job, or that you get income from other non-job sources, on line 4(c), enter the amount of extra tax you want to withhold to cover the additional income. Or make estimated payments.
If 4(a) is greater than 4(b), your withholding will be increased, and vice-versa.

If you want to claim exemption from withholding, write “Exempt” in the space below Step 4(c). You’ll need to submit a new form annually if claiming exemption.

If you don’t want to go to the trouble of completing the steps, just checking your filing status calculates your withholding based on no other income and the standard deduction. You should check your withholding against a withholding calculator to make sure it’s adequate.

That’s all there is to it. Though it may look pretty daunting, it’s really not, and filling it out should result in withholding that’s closer to your actual tax liability than the old forms.

Polk & Associates

Large enough to serve a diverse clientele, yet small enough to maintain a hands-on approach, we are committed to maintaining the highest accounting and ethical standards with continuous education, extensive research resources, and excellent quality control.

Polk and Associates is a member of the Michigan Association of Certified Public Accountants, and the American Institute of Certified Public Accountants. The firm participates in the AICPA Peer Review Program, and has always received the highest level of award for its audit practice and quality control.