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January 6, 2020

IRS issues 2020 Publication 15 and Publication 15-T for income tax withholding

The IRS has released the 2020 Publication 15, Circular E, Employer's Tax Guide and the 2020 Publication 15-TFederal Income Tax Withholding Methods.

Starting in 2020, the formulas and tables used in computing federal income tax withholding are moved from Publication 15 to the new Publication 15-T. Publication 15-T is designed to work with the 2020 Form W-4 that was significantly modified to conform to changes under the Tax Cuts and Jobs Act, in particular, the elimination of personal allowances through 2025.

Not all employees are required to submit the new 2020 Form W-4, only newly hired employees who first receive wages in 2020, employees who claimed exemption from withholding in 2019 and employees who wish to change their Form W-4 in 2020. Accordingly, some employees will continue to have a Form W-4 on file that was submitted in 2019 or earlier years. Publication 15-T is designed to work with Forms W-4 submitted before and after January 1, 2020.

Personal allowance value is $4,300 when figuring income tax for Forms W-4 from 2019 or earlier years

When computing federal income tax withholding using the percentage method for automated payroll systems for employees who have not submitted a Form W-4 for 2020, the adjusted annual wage amount continues to consider personal allowances. For 2020, multiply each personal allowance claimed on the employee's Form W-4 by $4,300. (Publication 15-T, page 5.)

What to do if employee has no Form W-4 on file

The assumptions that apply when an employee fails to furnish a Form W-4 to the employer vary depending on when the failure first occurred. (Publication 15-T, page 2.)

  • If you first paid wages to an employee in 2020, including an employee who was rehired in 2020, and the employee fails to furnish a Form W-4, assume the employee checked the box on Form W-4 for Single or Married filing separately in Step 1(c) and made no entries in Step 2, Step 3, or Step 4 of the 2020 Form W-4.
  • If an employee was paid wages in 2019 (or earlier years) and failed to furnish a Form W-4, continue to assume that they claimed single and zero personal allowances.

Claiming exemption from federal income tax withholding

Unlike the prior Form W-4, there is no dedicated area where an employee can claim exemption from federal income tax withholding. Instead, employees claim exemption by writing "Exempt" on Form W-4 in the space below Step 4(c). As in the past, when the employee claims exempt in Step 4(c), federal income tax is not withheld from wages apart from supplemental wages of more than $1 million, where federal income tax is mandatory. (Publication 15-T, page 3.)

The IRS instructs that electronic Form W-4 systems should provide a certification section below Step 4(c) for employees who are eligible and want to claim exemption from withholding. Instead of writing "Exempt," employees certify that they meet the following two conditions: (1) you had no federal income tax liability in 2019, and (2) you expect to have no federal income tax liability in 2020.

Nonresident alien employees

When completing the Form W-4, nonresident aliens are required to:

  • Not claim exemption from federal income tax withholding
  • Request withholding as if they're single, regardless of their actual filing status
  • Not claim the child tax credit or credit for other dependents in Step 3 of Form W-4 (Note, however, that nonresident aliens who are residents of Canada, Mexico, or South Korea, or are students or business apprentices from India may claim, under certain circumstances (see Notice 1392), the child tax credit or credit for other dependents.)
  • Write "Nonresident Alien" or "NRA" in the space below Step 4(c) of Form W-4

The IRS has clarified that electronic Form W-4 systems should provide a field for nonresident aliens to enter nonresident alien status instead of writing "Nonresident Alien" or "NRA" in the space below Step 4(c) of Form W-4. Employers should instruct nonresident aliens to see Notice 1392Supplemental Form W-4 Instructions for Nonresident Aliens, before completing Form W-4. (Publication 15, pg. 22.)

Contact Information
For additional information concerning this Alert, please contact:

Workforce Advisory Services - Employment Tax Advisory Services


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