How your State Tax Withholding may have been Affected by Changes to the 2020 Form W-4
You may have noticed a change to your state tax withholding amount on your 2020 paychecks. The amount of the withholding change from 2019 varies greatly from person to person depending on the withholding status and prior allowances claimed.
What changed and when?
The IRS issued a new federal Form W-4 that went into effect January 1, 2020. In prior years, the W-4 allowed an employee to claim “allowances.” The 2020 version of the form no longer offers this option. Tax withholding rules vary state to state, and some may not have been affected as significantly as others.
Which states are affected?
States that rely on the Form W-4 to determine an employee’s withholding amount were most significantly impacted by the change. Those states include Colorado, New Mexico, North Dakota and Utah.
In addition to these four states, other states issued rules regarding new employees who started work on or after January 1, 2020, and those who wish to change their withholding in 2020. They include:
- California: Use Form DE 4
- Delaware: Use Form W-4
- Massachusetts: Use Form M-4 (Also note: A flat income tax rate of 5% went into effect on Jan. 1, 2020.)
- Minnesota: Use Form W-4MN
- Nebraska: Form W-4N must be used any time an employee fills out a 2020 Form W-4
- New York: Form IT-2104 must be used any time an employee fills out a 2020 Form W-4
- Oregon: Form OR-W-4 must be used any time an employee fills out a 2020 Form W-4
- Rhode Island: Use state withholding certificate Form RI W-4 only (Employees who have not yet filled this form out must now do so.)
- South Carolina: Use Form SC W-4
- Wisconsin: Use Form WT-4
How did this impact my paycheck?
Once the revised tax laws took effect, these states’ withholding calculations began to conform to state-issued 2020 tax tables, regardless of prior-year filing statuses.
Where can I go to learn more?
Each state offers a significant amount of information about the 2020 Form W-4 changes. Visit your state’s website or download the white paper, “The new Form W-4: Withholding in 2020, Line by Line” from Bloomberg Tax & Accounting, to learn more.
For additional questions regarding taxes, please consult with your tax professional.