Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

January 24, 2020

US IRS creates spreadsheet to assist employers with income tax withholding calculation; Form W-4 revised to reflect change in medical expense deduction

The IRS has published to its website a tool called the Income Tax Withholding Assistant, a spreadsheet designed in Excel to assist small employers in computing the amount of federal income tax to withhold from employees' paychecks. The tool was created based on feedback from the business community that small employers require assistance as they transition to the new 2020 Form W-4.

The Income Tax Withholding Assistant is designed to work with 2020 Forms W-4 and those Forms W-4 submitted before 2020. The IRS emphasizes that businesses using an automated payroll system won't need to use the tool to calculate income tax withholding.

The Income Tax Withholding Assistant can be downloaded here.

Form W-4 revised to reflect change in medical expense deduction

The IRS announced that due to the change in the medical deduction expense floor percentage from 10% to 7.5% effective in 2020, it was necessary to update the percentage on line 1 of the Step 4(b)-Deductions Worksheet on page 3 of the 2020 Form W-4 to 7.5%. The IRS also made one minor editorial clarification on line 4 of that worksheet, changing "from Schedule 1" to "from Part II of Schedule 1."

Although the revised Form W-4 became available on December 31, 2019, the IRS says that employers may still use copies of the form printed or downloaded before December 31, 2019, noting that those forms will have the wrong 10% percentage shown.

Ernst & Young LLP insights

The new Income Tax Withholding Assistant is not only a great tool for small businesses grappling to understand the new Form W-4, but also a tool that large employers can use to test and review their automated payroll systems.

Employers should be certain that the 2020 Form W-4 available to employees includes the latest update reflecting the change in the medical deduction floor percentage to 7.5%.

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

Workforce Advisory Services - Employment Tax Advisory Services


EY Payroll News Flash


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more