2020 w-4

[cipparulo12345]

Is anyone else having a some difficulty understanding the new W-4? Let's say married couple - Taxpayer has higher income so you use the multiple jobs worksheet on page 3. You use this only for him because he has the higher income. Also you figure out the dependents Step 3 and other income and deductions Step 4 on his W-4 because he has the highest paying job.
So for the spouse who has the lower paying job to you just fill out the name, address, city, state and zip and sign and that is it.
This is the craziest thing I have ever seen.

[kathyc2]

How you fill it out depends on what the goals are. Refund? Break even? Same withheld as from old W4?

[kathyc2]

Unless preparers have a good understanding of the math and behind with scenes calculations of new W4, I strongly recommend against assisting clients with completing it.

[TaxGuyBill]

Unless preparers have a good understanding of the math and behind with scenes calculations of new W4

After filling it out according to the directions, isn't it just adding amounts to Line 4a and 4b?


To increase withholding (to potentially get a larger refund), add to Line 4a. Hypothetically, the amount on 4a multiplied by the tax bracket percentage should result in the annual increased withholding.

To decrease withholding (to reduce refund, or owe money), add to Line 4b. Hypothetically, the amount on 4b multiplied by the tax bracket percentage should result in the annual decreased withholding.


Right???

[kathyc2]

Right???

Yes, but I would say you have a better understanding than most of how this all comes together. I would hope most preparers would know that checking HOH box that was not available before would reduce refund, but I'm not sure. Could they calculate how much lower the refund would be? Would they know how much difference withholding would be by checking/not checking 2c box? Would they know whether checking single instead of MFJ and 2c would result in more or less withholding? Could they calculate how much the difference should be? There are just a lot of variables with the new form. As a general rule completing form from the instructions will result in less withholding and lower refund. If preparer assists in completing form without client having an understanding that refund will be lower, there are going to be some irate clients.

[ATSMAN]

I just used the IRS calculator for now: https://apps.irs.gov/app/tax-withhol...nd-withholding

You do need more details so I always have them bring their last paycheck stub. The calculator has entries for multiple jobs and taxes already withheld.

[kathyc2]

I just used the IRS calculator for now: https://apps.irs.gov/app/tax-withhol...nd-withholding

You do need more details so I always have them bring their last paycheck stub. The calculator has entries for multiple jobs and taxes already withheld.

Better than flying blind, but it has limitations. A couple situations I plugged in has the adjustment coming in the form of extra withholding. If the income becomes higher during year (overtime, raise, unexpected bonus) the extra withholding on 4c may not be sufficient to cover liability.

Again, consider if you want to take liability for helping them complete.

[ATSMAN]

Again, consider if you want to take liability for helping them complete.

That is a valid concern. I think we need to re enforce all the time that clients may need to adjust withholding anytime they get a big raise or change in job status etc. If you print the IRS report at the end, just write or stamp estimate only and have the client sign it.

I do something similar when I do projections mid year for certain clients.

[kathyc2]

That is a valid concern. I think we need to re enforce all the time that clients may need to adjust withholding anytime they get a big raise or change in job status etc. If you print the IRS report at the end, just write or stamp estimate only and have the client sign it.

I do something similar when I do projections mid year for certain clients.

If you are doing it, I'd strongly suggest calculating if the last pay stub is in line with YTD. Example, if we are 4 weeks in, is current paystub very close to 25% of YTD, both for gross and FIT? The calculator puts way to much weight on current withholding, and can produce misleading results. If current paystub is lower or higher than average the results displayed will not be correct.

[spanel]

If you are doing it, I'd strongly suggest calculating if the last pay stub is in line with YTD. Example, if we are 4 weeks in, is current paystub very close to 25% of YTD, both for gross and FIT? The calculator puts way to much weight on current withholding, and can produce misleading results. If current paystub is lower or higher than average the results displayed will not be correct.

4 weeks in would only be 9%
3 Months in would be 25%

Chris

[kathyc2]

4 weeks in would only be 9%
3 Months in would be 25%

Chris

You totally misread. If the paystub you are looking at has 4 weeks pay in the YTD, then the one paycheck would be 25% of the YTD. The calculator takes the amount you put in "last check withholding" and assumes all the remaining checks will withhold that amount. If that one paycheck is not the average it will skew results.

[mastertaxguy]

For what it is worth....

My office does not do a lot of payroll. Our payroll person found it useful to look at IRS Pub 15-T for 2020 as we computed federal income tax withholding for our staff and reviewing that (particularly the results on page 7) with affected employees.

But then we only have 6 employees and 2 contract workers who get a flat 20% Federal withholding.

[ATSMAN]

You just need to remind folks with variable pay that fluctuates pay period to pay period by significant amount that they MUST do a mid year/ 3Q check. I have a sales person as a client and I have seen weeks with a flat figure like $250 or $300 and then a large amount in one paycheck.