Form W4 is for providing employers with the necessary information to withhold tax accurately. Employees would previous claim allowances on Form W4 but this has been removed with the new form.
The Internal Revenue Service removed the allowances on Form W4 to make it simpler and more accurate. At first glance, it may seem a bit off as claiming allowances and getting done with may sound a lot simpler and you wouldn’t be wrong.
To determine how many allowances to claim, you would need to use the worksheet anyways. Now, instead of using the worksheet to determine how many allowances you need to claim, you’re providing what’s necessary to figure out taxes withheld. This will help both the employer and the employee to adjust taxes withheld.
Since you basically will be entering your anticipated taxable income and credits to claim, your anticipated tax liability will be determined. Compared to claiming allowances, it’s a lot more accurate.
What does this mean for the taxes withheld?
If you’ve filed a Form W4 prior to 2020, nothing will change. Your employer will withhold tax based on the allowances you claimed on your tax return. There is also no need for you to file a Form W4 now that it’s been updated.
However, you may want to opt to file a new Form W4. The changes in Form W4 will allow you to withhold tax at a much accurate rate. This will ensure that you’re not owing tax but also won’t withhold tax excessively.
After all, you wouldn’t want to loan your money to the government for free. That said, make sure to withhold tax at the rate where you don’t end up owing to the IRS and get a minimal tax refund. Learn about how to maximize tax refunds without withholding too much tax.
As for filing the new Form W4 without the allowances, you can file one on your computer and print out a paper copy later or download yours as PDF to give your employer via e-mail or upload it to your company database. Start filling out Forms W4 below.
W4 Form 2021 – Online Fillable and Printable PDF