At the tail end of January, employers must make available to their employees a copy of their W2 forms, in order to facilitate the completion and filing of tax returns. Don’t get surprised from this tax filing effort to find out that you owe additional money, or will be owed a large refund. To help manage this financial situation, file an accurate Form W4 with your employer.
Form W4 helps employees establish how much money should be withheld from paychecks in order to fulfill federal income tax obligations and tax returns. For 2020, the Internal Revenue Service created a new version of the Form W4 for Employee Federal Tax Withholdings.
Here are a few helpful tips for this very important Form W4 paperwork (please address complex questions to your tax advisor):
- Complete and deliver Form W-4 to your employer so they can withhold the correct amount of federal income taxes from your pay. If too little is withheld (temporarily boosting your paycheck), you will generally owe tax when you file your tax return and in some cases may even owe interest and penalties. If too much is withheld (giving the government an interest-free loan), you will generally be due a refund.
- Any current employee who worked for Shannon Staffing in 2019 does not need to fill out a new W4 form in 2020, UNLESS you ended your employment with us in 2019 and are rehired in 2020.
- If you are (i) a Newly-Hired employee, (ii) a Returning Employee who last worked for Shannon Staffing more than 6 months ago, or (iii) an Existing Employee who wishes to adjust your tax withholdings, you MUST complete this new Form W4 for 2020.
- For employees who have a simple tax situation, complete Step 1 and Step 5 (signature and date) of the form. Step 1 is where you enter your name, Social Security Number and legal address. You also choose your filing status: Single, Married, Head of Household (HOH).
- Personal exemptions no longer exist on the W4 form. The federal tax tables have changed to incorporate exemptions into the weekly federal withholdings on the employees’ paychecks. For example, if you used to claim Married, 2 Exemptions on the older version of the W4 form, now you simply check the Married, Filing Jointly box in Step 1.
- If you have children under the age of 17 or other dependents that you can legally claim on your tax return as dependents, you MAY want to complete Step 3. In completing this section of the W4 form, your federal taxes withheld will be reduced. This step is NOT mandatory. It is up to you to complete Step 3 if you wish to reduce your federal withholdings on your paycheck.
- Step 2 and Step 4 of the W4 form are optional. These steps will withhold additional federal taxes out of your paycheck for situations such as having multiple jobs or other income that you may earn throughout the year, such as investment income (rental income, interest and dividends). Under Step 4(c), you can set a fixed dollar amount of additional federal taxes that you want to be withheld out of the paycheck.
- Complete a new Form W-4 and deliver it to your employer when changes to your personal or financial situation would change the entries on the form.
(written by: Nelson)