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 redesigned Form W-4 for 2020 and subsequent years. Before 2020, the value of a withholding allowance was tied to the amount of the personal exemption. Due to the Tax Cuts and Jobs Act of 2017 (TCJA) (Pub. L. 115-97), however, taxpayers can no longer claim personal or dependency exemptions; therefore, Form W-4 no longer asks employees to report the number of withholding allowances that they are claiming.
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, they should be treated as if they had checked the box for “single or married filing separately” in Step 1(c) and made no entries in Steps 2, 3, or 4.
A W-4 remains in effect until the employee provides a new one. Revised withholding must begin no later than the first payroll period ending on or after the 30th day ...

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