The Internal Revenue Service (IRS) recently released the final version of the 2020 Form W-4, Employee's Withholding Certificate. The form includes major changes, including several new input elements for federal income tax withholding calculations. https://www.irs.gov/pub/irs-pdf/fw4.pdf
In most states, employers are also required to withhold state taxes as well as federal income taxes from employees' wages. Many states require employees to complete a state withholding certificate or the IRS Form W-4 for state purposes. With the major changes to the IRS Form W-4, most states have updated their requirements along with withholding certificates. Since federal allowances were removed from the redesigned federal Form W-4, the form cannot be used for certain states.
Prior to 2020, Arkansas, California, Georgia, Idaho, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, West Virginia, and Wisconsin accepted the federal Form W-4 as an alternative to the state withholding certificate.
Pennsylvania does not use a withholding certificate. Pennsylvania requires employers to calculate the state tax to be withheld from an employee's wages using a flat percentage rate, currently 3.07 percent.
With all these changes, employers will need to carefully review each of the state requirements. Certain states, such as Wisconsin, revised their state withholding certificate for wages paid after 2019. Like the IRS, states will generally not require existing employees to complete new withholding certificates. Rather, the new withholding certificates will apply to newly hired employees and existing employees who wish to adjust their withholding.
Additionally, states may have specific requirements for employers to follow when an employee does not complete a state withholding certificate. Oregon, for example requires that employers withhold Oregon state income tax at a flat 8 percent if an employee does not complete Form OR-W-4.
Make sure that you're using the correct state withholding certificate and following the applicable state requirements. You can locate state tax information via the IRS website, at https://www.irs.gov/tax-professionals/government-sites
The chart below provides an overview of the state withholding certificate rules. While every effort has been made to offer the most current information, the laws, rules and regulations are constantly changing. In addition, employers should review individual state guidelines, generally found in the states' Employer's Tax Guides.
The states of Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming do not impose a state income tax on wages.
Effective January 1, 2020 (as of 01/08/2020)
Employers Should Already Be Prepared for 2020 Changes
Payroll departments, Human Resources and others involved in the hiring process will need to be aware and monitor ongoing changes in light of the significant IRS and related state income tax withholding requirements. It may be necessary to adjust certain hiring and/or onboarding procedures. For example, it may be helpful to offer new employees additional time and a private room to complete the Form W-4 and/or state withholding certificate or permit new employees to take the forms home for completion.
- Employer Toolkit and FAQs: https://explore.adp.com/w4-client-em
- 2020 Form W-4: https://www.irs.gov/pub/irs-pdf/fw4.pdf
- Internal Revenue Service (IRS) State Government Sites: https://www.irs.gov/tax-professionals/government-sites
- ADP Fast Wage and Tax Facts: https://www.adp.com/resources/tools/tax-guides-and-forms/state-and-local-tax-guides/state-tax-guide.aspx
ADP Compliance Resources
ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at www.adp.com/regulatorynews.
ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.
If you have any questions regarding our services, please call 855-466-0790.
One ADP Boulevard,
Roseland, NJ 07068
Updated on January 14, 2020