Since we don’t want the IRS to put a target on your back or your employees to be under-withheld this year, here are the most frequently asked questions about the new W-4 to help you better understand it and be in compliance.
Why did the 2020 W-4 change?
The 2020 Form W-4 changed to simplify the form and offer a more transparent and accurate withholding system. This is the most significant overhaul of the form in decades and will take some getting used to.
Is the new W-4 better?
If you ask most churches or employees this question, the answer is likely no. However, over time and with more information, it will hopefully become easier to use and understand while achieving more accurate and transparent withholdings.
Do all employees need to fill out a new W-4 for 2020?
No. Here’s a breakdown of the most common employment scenarios related to the W-4:
Will need to complete the new W-4
• All new hires
• Employees who completed a Form W-4 before 2020 and want to make changes to their withholding in 2021
Will not need to complete the new W-4
• Existing employees hired before 2020
Also, keep in mind that existing employees can leave their prior W-4 on file indefinitely, so you want to be prepared to support the preceding W-4 and allowances indefinitely.
What do I do about employees hired in 2020 who don’t submit a
If a new employee doesn’t submit a Form W-4, you will treat them as a single filer with no adjustments. Doing so will provide them with a single filer’s standard deduction with no other personal information taken into account.
How do I explain to employees how to complete the new 2020 W-4?
Whether an employee needs to complete the new Form W-4 or chooses to, you don’t want to just hand them the form and hope for the best. This can lead to inaccurate completion, frustration, and confusion due to the changes.
Instead, you want to have a plan in place for supporting employees as they complete the form, whether that’s being present with them, offering a pre-recorded training, or having a go-to contact for W-4 questions.
Can I request that all of my employees, whether they were hired before 2020 or not, submit a new W-4?
Yes, you can request this, however, remember that this isn’t a requirement.
With your request, you want to be sure to note the following:
• They are not required to complete the new W-4
• If they don’t submit the new W-4, their withholdings will continue based on their previous W-4
If employees choose not to do so, you can’t treat them as though they failed to furnish a Form W-4 because it’s not the new Form W-4.
If mistakes were made on previous pay periods, what do I do?
If you made mistakes on withholding during previous pay periods while you were figuring out the system, it’s your responsibility to make the necessary corrections. If not, the IRS could put a spotlight on your church, which you don’t want. Your employees could also be required to make those adjustments in 2021 with a more massive tax bill.
How do I handle employees who were rehired during the pandemic instead of on furlough or called back?
Employees who are rehired must complete a new W-4. However, employees returning after a furlough or call back don’t have to complete a new form because they remained employees throughout the time they weren’t working.
My third-party payroll provider didn’t implement the new W-4 and withholding rules properly. What do I do?
First, you want to ensure that they have more clarity before moving forward. Ultimately, any mistakes made will have to be fixed. At the end of the day, your church, not the payroll company, will be responsible for the numbers that come back, and if anything is incorrect, the IRS and your employees will expect you to make it right.
Clergy Financial Resources offers several options to help you with your tax questions or filing. We have listed three great options to get started.
Pro Advisor I Tax Support
This support service provides you comprehensive answers to your notice questions. This support service is available at a flat rate of $45.00 for each 30-minutes session.
Online W-2 or 1099 Filings
This service is design for churches that would like to simplify the process of filing the W-2 or 1099 Forms. When your year-end data is ready, enter it on the W2 data screen. Then relax! We’ll do the rest. Let us e-file, print, and mail recipient copies and send you a confirmation that it’s all done. W-2s have never been easier!
Full Church Payroll, Simplified
Payroll is complicated. There are a lot of tasks, laws, forms, and calculations. With so many things to remember, it’s easy to make a mistake. Let’s Clerry Financial Resources help with payroll compliance.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
For more information or if you need additional assistance, please use the contact information below.
Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369
Tel: (888) 421-0101
Fax: (888) 876-5101