Note: the Form W-4 for 2020 has substantial changes. Read more about them here.
During the year, changes in an employee’s marital status, exemptions, adjustments, deductions or credits may occur which will impact what they claim on their tax return. When these changes occur, employees should change their withholding status and number of allowances in Employee Self-Service/Tax forms appropriately. If the changes reduce the number of allowances an employee is allowed to claim or if their marital status changes from married to single, employees must update their Form W-4 within 10 days of this change. Generally, employees can make changes to their W-4 whenever they wish to change their withholding allowances for any other reason.
Here are some examples of lifestyle changes which could impact withholding allowances:
- Birth or adoption of a child
- Loss of an exemption
- Purchase of a new home
- Filing Chapter 11 bankruptcy
Who is Exempt from Withholding?
If an employee claims exemption from withholding, employers will not withhold Federal income tax from their wages. The exemption applies only to income tax and not to Social Security or Medicare taxes.
Employees can claim exemption from withholding only if both of the following situations apply:
- They had a right to a refund of all federal income tax withheld in the previous tax year because they had no tax liability
- They expect a refund of all federal income tax withheld for the current tax year because they expect to have no tax liability
For additional assistance as to whether you can claim exemption from withholding, you can refer to IRS Publication 505 Tax Withholding and Estimated Tax. This guide will walk you through a series of “yes” and “no” questions to help you decide whether you can claim exemption from withholding.
When Will New W-4 Form Allowances Go into Effect?
Any change to the W-4 form entered through Workday will take effect the next available paycheck.