Recently the IRS released the 2021 Form W-4, Employee's Withholding Certificate, and the 2021 Publication 15-T, Federal Income Tax Withholding Methods. The updates in these forms include more vocabulary in the directions to help users understand how they should complete these forms.
The 2021 Form W-4 includes a slight change in Step 1: Enter Personal Information. The IRS now links their Tax Withholding Estimator they launched on August 6, 2019. In Step 3: Claim Dependents, the IRS added the word "total" so that users can understand they should be considering their total income when determining if their income will be less than $200,000. The Multiple Jobs Worksheet, Step 2(b), has a small change that removes Form 1040-SR from the directions in Step 4(b). While these are only a few of the changes in the 2021 Form-W-4, they are not as drastic as the changes we experienced in the 2020 Form W-4 release. However, the new vocabulary adds more clarification for users, which is always appreciated.
In the 2021 Publication 15-T, the IRS allows the utilization of a new computational bridge when an employee has a 2019 Form W-4 or earlier version on file. To assist an employer in finding the 2020 Form W-4 comparable data for an employee using a 2019 Form W-4 or an earlier version, an employer should follow the computational bridge's four steps.
In the 2020 Form W-4, the Filing Statuses were updated from the "Single," "Married," or "Married, but withhold at higher single rate" to "Single or Married Filing Separately," "Married filing jointly or Qualifying widow(er)" and "Head of household." Step 1 of the computational bridge helps an employer determine which filing status an employee should claim based on the previous information. Once the filing state is determined in step 1, the employer can continue to steps 2 through 4. Monetary values are added to the 2020 Form W-4 or newer version based on the employee's previous filing status.
For more information regarding the 2021 Form W-4 and the 2021 Publication 15-T, visit the IRS website. Subscribe to the Symmetry Software Newsletter to stay updated on our Payroll Tax Insights!