On December 5, 2019, the IRS released the redesigned 2020 Form W-4 (Employee’s Withholding Certificate). The new form no longer uses withholding allowances. Instead, there is a five-step process for determining employee withholding. The goal of this new form is accurate withholding throughout the year so you are neither due a refund nor owe taxes come April when individual tax returns are due.
The five-step process, only Steps 1 and 5 are required, for determining employee withholding are as follows:
- Step 1 - Enter Personal Information
- For an employee’s personal information and his/her anticipated filing status to determine the standard deduction and tax rates used to compute withholding.
- Step 2 – Multiple Jobs or Spouse Works
- For an employee who has more than one job at the same time or are married filing jointly and both the employee and his/her spouse work.
- Step 3 – Claim Dependents
- Provides instructions for determining the amount of the child tax credit and the credit for other dependents that you may be able to claim when you file your tax return.
- Step 4 – Other Adjustments
- For an employee to enter other estimated income for the year (ex - interest, dividends and retirement income), deductions other than the standard deduction to reduce withholding and any additional tax the employee wants withheld for each pay period.
- Step 5 – Sign Here
- The employee signature and date under penalties of perjury.
The IRS is not requiring all employees to complete a 2020 Form W-4. Only new employees hired 1/1/2020 or after and any employee wishing to make changes to their 2020 withholdings will be required to use the 2020 Form W-4.
The IRS does provide a FAQs and a Tax Withholding Estimator to assist employees when completing the redesigned form. Employees are encouraged to use this free tool or seek advice from a tax professional if they have any questions.
Parking deduction is moving back to a pre-tax deduction in 2020.
As part of a massive, bipartisan year-end spending and tax package enacted on December 20, 2019, Congress repealed a section of the 2017 tax law that required tax-exempt organizations to pay a 21 percent tax on employee benefits, such as parking. As a result, Ball State University is again able to utilize a pre-tax parking plan. Beginning with the first paycheck of 2020, all payroll deductions for parking passes will be done a pre-tax basis. If you have any questions about these changes, please contact Payroll and Employee Benefits at 285-8461.
As a reminder, University employees cannot give tax advice. If you have any questions about these changes, please consult a tax advisor.