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How Can Employers Lessen Form W-4 Frustration

2021 is quickly approaching, and with a new year, many employees—whether new hires or existing employees—may want to update their Form W-4. If any of your employees claimed an exemption from federal withholding last year, they'll need to fill out a new Form W-4 by Feb. 15 to continue the exemption, especially if they claimed exempt from federal taxes in 2020.

The IRS has not yet finalized the 2021 Form W-4, but it is expected to be very similar to the 2020 Form W-4.

As you might expect, a significant number of people have found it harder to understand the new 2020 Form W-4, according to the results of the annual “Getting Paid in America” survey from the American Payroll Association (APA).

Based on these findings, employers might still need to take a proactive role when new and current employees complete the form for the first time.

Results and Response

Most people the APA surveyed opted not to complete a new W-4 this year, but nearly a quarter of respondents (24.1 percent) did fill out an updated form.

While a good chunk of employees completed a new form because they started a new job and had to do so (31.6 percent), almost as many people said they filled out a new W-4 because they wanted to adjust their withholding so they could have more federal tax taken out of their pay (30.6 percent). This was likely done to account for increased tax liability due to the changes put in place by the Tax Cuts and Jobs Act.

Nearly 43 percent of those who filled out a new Form W-4 in 2020 said the form was more difficult to understand and complete than it was the last time they filled out the form using its old format.

Although employers are instructed never to provide tax advice to employees, below are some basic ways to assist your employees if they opt to complete a new Form W-4 once it's finalized by the IRS

Ways to Ease the Frustration:

  • Discuss the possibility of giving new employees more time to get the info they need to complete the W-4 correctly, including sending them the form in advance and allowing them to work on completing it at home before their first official day of work.
  • It’s a good idea to pass along IRS info about the new Form W-4 to employees both old and new so they can reference it while filling out the form.
  • Recommend the agency’s tax withholding estimator.

Namely does not provide legal, accounting, or tax advice. Please consult with professional counsel for any tax, accounting or legal questions.

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