Withholding laws & HR compliance analysis

Withholding: What you need to know

The amount of federal income tax withheld is based on withholding tables published by the Internal Revenue Service (IRS) and the information provided on each employee's Form W-4, Employee's Withholding Certificate.
The IRS revised Form W-4 for 2019 to reflect the Tax Cuts and Jobs Act of 2017 (TCJA) (Pub. L. 115-97). Employees whose claimed number of withholding allowances was reduced by the TCJA were required to give their employer a new Form W-4 in 2019. The IRS developed a Tax Withholding Estimator to help employees determine how many allowances to claim.
The IRS made additional changes to Form W-4 for tax year 2020. The redesigned Form W-4 no longer uses the concept of withholding allowances, which was previously tied to the amount of the personal exemption. The TCJA suspended personal and dependent exemptions through the end of tax year 2025.
Employees who submitted a Form W-4 in any year before 2020 are not required to submit a new form merely because of the redesign. Employers can continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.
However, new hires now must use the redesigned form, along with existing employees who wish to adjust their withholding. An employer may ask existing employees to submit a new Form W-4 using the new version, but must also explain that they are not required to do so and that, if they do not, withholding will continue based on the form they previously submitted if it is valid.
Each new employee should fill out a W-4 when hired. If a new employee does not provide a completed W-4, tax is withheld as if he or she is single, with no withholding allowances. New employees ...

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