For over 30 years, employees have provided employers with Form W-4, Employee’s Withholding Certificate, that has directed employers to withhold federal income tax from paychecks based on marital (filing) status and the number of personal exemptions. Beginning Jan. 1, 2020, Form W-4 has been redesigned to remove personal exemptions and align the withholding process more closely to the Individual Income Tax Return, Form 1040.
If you are having the right amount of federal income tax withheld from your paycheck based on the now old marital (filing) status/number of personal exemptions, you don’t need to do anything. Your withholding will continue based on your previously submitted Form W-4—based on marital (filing) status/number of personal exemptions. If you want to make a change to your federal income tax withholding from this point forward, the number of personal exemptions will no longer be part of the withholding calculation.
Here at Heartland AEA, you make changes to your federal (and state) income tax withholding via Employee Dashboard > Employee Online > Tax Information (in the left-hand navigation section). This application has been changed to mirror the new Form W-4. You can link to the paper Form W-4 and its instructions for the Tax Information application.
Before making a federal income tax withholding change, click on the Federal W-4 Form link and carefully read the instructions. The intent of the redesigned W-4 is to increase the accuracy of your withholding. Depending on your current marital (filing) status/number of personal exemptions, your withholding change may produce unexpected results if you don’t read the instructions carefully. On the online withholding application, you must complete Step 1. Although Steps 2 through 4 are optional, completing them will help ensure that your federal income tax withholding will more accurately match your tax liability. Step 2 is for households with multiple jobs, Step 3 is used to claim tax credits for dependents, Step 4 is for other adjustments (e.g., additional income such as interest and dividends, itemized deductions that exceed the standard deduction and extra tax you might want to be withheld). You can change your withholding as often as you want/need through the Employee Online > Tax Information application.
The Internal Revenue Service (IRS) highly recommends employees do a paycheck checkup via their Tax Withholding Estimator. This process will require your most recent pay stub and most recent tax return. This link to the IRS FAQs may also be helpful as you contemplate a federal income tax withholding change. If you have specific questions about your personal tax situation, contact your tax advisor.
State Income Tax Withholding
The state of Iowa continues to base state income tax withholding on marital (filing) status and the number of exemptions. There has been no change to the Iowa state income withholding calculation. However, the state has updated the withholding tax tables for 2020. This will generally mean a slight decrease in the amount of state income tax withholding from paychecks beginning Jan. 1, 2020. Likewise, the federal income tax withholding tables have been adjusted for inflation, resulting in a slight decrease in federal income tax withholding.
The “What If” calculator on our Employee Online application has been removed as our software provider has not yet made changes to this tool based on the new federal Form W-4. We don’t know when, or if this functionality will return. We’ll let you know if it becomes available again in the future.
If you have any questions about this information, contact Steve Jordan, Senior Payroll Specialist, at ext. 14908.
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