Current eMessage > Product > February 2020

Product Spotlight

Accounting Master is enhanced to accommodate W-4 changes

by Stacie Finken, Accounting Master Product Owner

The Internal Revenue Service (IRS) recently released the final version of the 2020 Form W-4, Employee’s Withholding Certificate in late December 2019. The form includes major changes, including new elements for federal income tax withholding calculations.

To accommodate the most recent changes to the 2020 W-4 Federal Tax Withholding updates, MACC has made enhancements to the Employee and Federal Tax tables. From the Employee screen, there is a new W-4 Form field that allows users to select W-4 form type of 2019 and Prior or 2020 Forward. Upon upgrade, the W-4 Form field will default to 2019 and Prior option with no function changes. The 2020 Forward option, when selected, will enable the Dependents Credit, Other Income, Additional Deductions, and the W-4 Only Two Jobs checkbox, which will be included with the federal tax withholding process.

The new fields can be used to enter amounts based on the completion of specific steps from the employee’s W-4 2020 form. If the employee has completed Step 3 Claim Dependents, the total amount is entered into the Dependents Credit field. If the employee has completed Step 4(a) Other Income, the total amount is entered into the Other Income field. If the employee has completed Step 4(b) Deductions, the total amount is entered into the Additional Deductions field. The W-4 Only Two Jobs checkbox can be checked if the employee has checked the only two jobs total on the 2020 W-4 form in Step 2(c).

The Federal Tax maintenance table was updated to accommodate the new W-4 2020 federal tax withholding tables. For 2019 and Prior W-4 forms, the Married Allowance and Single Allowance amounts were the same; the field was modified to Amount Per Exemption. For 2020 and Forward W-4 forms, the Married Filing Jointly Allowance and Other Allowance fields were added. The amounts entered into these fields are part of the withholding calculations. The Tax Table Entries section was updated by adding Head of Household to the Type drop-down selection. There are now six different tax tables that can display depending on the W-4 Form selection and if the W-4 Only Two Jobs option is checked or not.

In certain 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. Due to the major changes to the IRS Form W-4, some 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. Due to these changes, it is recommended to carefully review your state requirements. Please verify you’re using the correct state withholding certificate and following the applicable state requirements.