You Thought 2020’s New W-4 was a big change? See what 2021 is bringing!

…Just kidding. As we’re learning, 2021 is basically an extension of 2020 — and 2021’s W-4 is no exception. But while there aren’t any changes to the new W-4 format, now is a good time to revisit the significant changes made in 2020 that have left many scratching their heads.

How is the new W-4 simplified?

If you’re single and only have one job or you’re married but filing separately, the redesigned W-4 is extremely easy to complete. You only need to write your name, check the box that says you’re single or married filing separately, and then sign the form. The IRS will then calculate your filing status based on the standard deduction for your filing status and tax rate.

Where do I write my allowances?

Asking this question may age you in a few years, as the new W-4 doesn’t mention allowances. Gone are the days of writing “Single and 1” or something comparable. If you write in anything beyond your name and basic information, it will be an actual dollar amount to claim dependents or other adjustments from the standard deduction.

What if, between my spouse and I, we are filing jointly and have multiple jobs?

If you and your spouse each hold one job and both make about the same amount of money, both spouses should mark the box on Step 2 (c) without needing to do any additional calculating in Step 4. Only one spouse should write in an amount to claim dependents (where applicable) in Step 3 of the W-4.

When one spouse has a higher paying job than the other, that person should use the tax estimator at http://www.irs.gov/W4App to determine the right amount of additional withholdings in Step 4. Again, only one of you should need to do this, while the other can simply write in their basic information at the top of the W-4 and sign at the bottom.

The spouse who uses the tax estimator should also be the one claiming dependents in Step 3. If you both claim dependents on each of your W-4s, you won’t have enough taxes withheld.

Is “claiming dependents” the same as “claiming allowances”?

No, these are not interchangeable terms. Remember, the former W-4 used the term “allowances” where you would write in a number (usually between 1-9) to claim a certain number of tax deductions.

The revised W-4 does not ask for a certain number of allowances but instead needs an actual dollar amount written in Step 3. Writing “2” instead of “$2,000” will create a serious tax withholding differential!

Should I use the 2020 or 2021 version of the W-4?

While the major overhaul of the W-4 was released in 2020, there are no format changes between the 2020 W-4 and the 2021 W-4. The only noticeable differences are minor adjustments made to the taxable wage and salary tables on page 4.

Having said that, you should always use the most recent W-4 when new employees are hired and/or existing employees want to update their tax withholdings.

My employer is still using my previous W-4 for my tax withholdings. Do I need to fill out the new W-4 form?

No, there is no requirement for you to fill out an updated W-4. The only time you’ll need to complete a new W-4 is if you change jobs or want to adjust your current withholdings. However, it’s a good idea to review your withholdings annually and make any updates, particularly if your income and/or number of dependents change.

When I filed my taxes, I had to pay $500 when I normally get a tax credit. What should I do?

This may be a case where you adjusted your withholdings last year and didn’t have enough withheld. If you expect to make about the same amount of money this year as you did last, the easiest solution would be to divide $500 by the number of paychecks remaining this year and then increase your withholdings by that amount in Step 4 (c).

Where can I find more Q&As about the new W-4?

The IRS has published multiple FAQs about the updated Form W-4 that include general and specific questions for both employees and employers. For more detailed questions about your tax situation, please contact your tax accountant.

New W-4

Struggling with the redesigned W-4? Here are some tips to help understand its simplicity.

New Revised W-4
Celeste Houston, Vice President - Payroll

Author Celeste Houston, Vice President - Payroll

Celeste is a Certified Payroll Professional (CPP) and has worked in the PEO industry since 1998. She has created remarkable relationships with her clients and colleagues and will forever hold the title of our company's first ever Employee of the Year.

More posts by Celeste Houston, Vice President - Payroll