Editor’s note: Updated on 12.30.19 with the most up-to-date information.
As the new year inches closer, employers and employees need to be aware of state and federal withholding changes that are going into effect. These changes are a result of the Tax Cuts and Jobs Act (TCJA), and impact withholding forms and requirements for employees.
What’s changing in Wisconsin?
Since federal withholding allowances have been removed from the federal W-4, it cannot be used in place of the Form WT-4 going forward. As of January 1, 2020, Wisconsin employees will no longer be able to use the federal Form W-4 for state withholding tax purposes. Instead, they will be required to submit a Form WT-4 for withholding allowances. This news comes after the Wisconsin Department of Revenue (DOR) revised the WT-4 (Employee’s Wisconsin Withholding Exemption Certificate). Up until this change, employees have been able to use the federal Form W-4 as a substitute for Wisconsin Form WT-4 if their federal allowances were equal to their state allowances.
What has changed with the 2020 Form W-4?
Since the 2020 federal Form W-4 complies with the income withholding requirements in the TCJA, it is significantly different than previous versions of the form. Although the federal form no longer has withholding allowances, it includes lines where employees can enter income, deductions, and tax credits directly so they’re factored into the withholding amount.
While the form is different, the IRS has designed the withholding tables to work with a form from any prior years or the 2020 form. The form includes a number of other changes, from new wage and salary ranges to new worksheet changes. To help taxpayers, the IRS has finalized Publication 15-T, Federal Tax Withholding Methods, which describes how to calculate withholding using the wage-bracket and percentage methods, and includes broader and updated tables. The IRS has also created a 2020 Form W-4 FAQ page for employers and employees to reference. And to help communicate the changes to employees, the American Payroll Association (APA) has created a sample letter for employers to use. Last but not least, the IRS posted a webinar, “Understanding the 2020 Form W-4 and How to Use it to Calculate Withholding,” to their video portal. This hour-long webinar includes everything from a detailed breakdown of the W-4 changes to a Q&A session related to those changes.
The final version of the form includes the 2020 withholding tables, and was released on December 4.
What does this mean for employers?
Starting in 2020, not only will employers need to collect a federal Form W-4, but also a Wisconsin state Form WT-4 and from all newly hired Wisconsin employees. Additionally, they’ll need to collect a Form WT-4 if employees want to change their number of state withholding exemptions. But, if existing employees have no changes to their state withholding exemptions, they do not need to provide the Form WT-4 to employers — unless employers request it.
And please note, if you have employees in other states than Wisconsin, check at the state level to see if they have new withholding form changes and requirements. And for a quick look, check out our state-by-state guide outlining if the state or the federal form is required.