Guide · 2020+ W-4
The Employer’s Guide to Form W-4
The 2020 redesign of Form W-4 replaced allowances with a five-step process. For employees it is simpler. For employers doing their own payroll math, it introduced a handful of gotchas that are still catching people out five years later. Here is what every step does to your withholding calculation.
Step 1 — Personal information and filing status
Step 1 captures name, address, SSN, and filing status: Single (or Married Filing Separately), Married Filing Jointly, or Head of Household. The filing status is the most important input on the entire form — it selects which bracket schedule you apply in Pub 15-T. Single and MFS share the same schedule. If Step 1 is incomplete, the W-4 is invalid; ask for a new one.
Step 2 — Multiple Jobs or Spouse Works
Step 2 is the step that causes the most under-withholding. It gives the employee three options to account for multiple income sources in the household: (a) use the IRS online estimator, (b) use the Multiple Jobs Worksheet, or (c) simply check the box. For employers, only option (c) changes your math: it tells you to use the “Step 2 checked” bracket schedules in Pub 15-T, which shift the 0% zone dramatically downward.
In concrete numbers, checking Step 2(c) cuts the combined standard-deduction zone for a married employee from about $32,200 to $16,100 per year. More of the wage falls into taxable brackets. More is withheld. That is the intended effect — the employee has another income source the IRS doesn’t want them surprised by in April.
Step 3 — Claim Dependents
Step 3 converts dependents into a flat annual dollar credit: $2,000 per qualifying child under 17, $500 per other dependent. The employee writes a total in the Step 3 line. As the employer, you divide that total by pay periods and subtract it from the tentative annual tax after the bracket schedule has run — not before. Applying it before the bracket math makes dependents function like a deduction, which produces too-low withholding.
Step 4 — Other adjustments
Step 4 is three optional lines:
- Step 4(a) — Other income. Annual income not subject to withholding (interest, dividends, rental income). Added to annual wages before the deduction step.
- Step 4(b) — Deductions. Annual deductions in excess of the standard deduction. Compared against the Pub 15-T Table 1 amount — the larger of the two is subtracted.
- Step 4(c) — Extra withholding per pay period. A flat dollar amount the employee wants added to every paycheck’s withholding, on top of whatever the calculation produces.
Step 5 — Signature
An unsigned W-4 is an invalid W-4. Do not begin using it for withholding until the employee has signed. Keep the signed form in the employee’s payroll file for at least four years after the date of the last return filed using the information.
Test a W-4 in the calculator
Enter the employee’s W-4 values along with gross wages and pay frequency. The calculator produces per-paycheck federal, FICA, and state withholding exactly as Pub 15-T specifies.
Open Calculator →Frequently Asked Questions
Can an employee still submit an old W-4 (pre-2020)?
Existing employees who have not submitted a new W-4 since 2019 can stay on their old form. New hires after 2019 and any employee making changes must use the current version of the form. Employers process both versions using the corresponding Pub 15-T tables.
What do I do if an employee leaves a line blank?
If Step 1 (name, address, filing status) is incomplete, the W-4 is invalid — ask the employee to redo it. If Steps 2, 3, or 4 are blank, treat those as zero: no multiple-job adjustment, no dependent credit, no extra withholding. Filing status defaults to Single if not marked.
How often can an employee submit a new W-4?
An employee can submit a new W-4 at any time, and employers must implement it no later than the first payroll period ending on or after the 30th day from receipt. Most payroll systems apply changes at the next pay cycle.
Does the employee have to justify the amount on Step 4(c)?
No. Step 4(c) is an employee-requested additional withholding amount per pay period. It can be any dollar amount, for any reason, and employers add it to the calculated withholding without question.
Is there a penalty for the employer if the W-4 is wrong?
Employers are not liable for W-4 errors made by employees, provided the employer withholds based on the information actually supplied. However, if the IRS issues a lock-in letter instructing a specific withholding amount, the employer must comply.