Do you need to do a "Paycheck checkup"?
On August 6, 2019, the Internal Revenue Service (IRS) released a new online Tax Withholding Estimator (the “Estimator”), which has been redesigned to make it easier for employees to have the right amount of tax withheld during the year. Many taxpayers earlier this year faced surprise tax bills, or refunds that were lower than expected because their withholding wasn’t adjusted for tax law changes that took effect in 2018. Even after 2018, the first full year in which the 2017 Tax Cuts and Jobs Act was in effect, many people are still uncertain as to how the Act changed their income tax situation, and whether they are having enough withheld.
If you need to complete a new W-4 form, submit the signed form to email@example.com for processing.
Form W-4 To Be Substantially Revised for 2020
The IRS just released a near-final Form W-4 for 2020 and, after 2019, employees will need to complete this substantially new form, which will not have withholding allowances.
The 2020 Form W-4 will generally be much more accurate than prior versions, but it will also require more input entries than taxpayers are accustomed to. In a nutshell, 2019 and earlier Forms W-4 asked for marital status, number of withholding allowances and, optionally, an additional per-payroll amount to withhold.
The 2020 Form W-4 will have several new entries:
- New marital status box for head of household,
- Checkbox for optional higher withholding,
- Full-year value of child, dependent, and other tax credits,
- Full-year amount of other (non-wage) income,
- Full-year amount of itemized deductions (over the standard deduction amount), and
- Per-payroll additional amount to withhold (unchanged).
With the exception of marital status, the other elements are optional, so employees could decide to only enter their marital status and sign the form, perhaps checking the “optional higher withholding” box if their spouse also works. Current employees will not be required to complete the 2020 Form W-4; however, if they want to adjust their withholding, the 2020 Form W-4 will be the only option after 2019.
The IRS has announced contribution and benefit limits for 2020.
On November 6, 2019 the IRS announced retirement plan contribution limits for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. For tax year 2020 the annual contribution limit is increased from $19,000 to $19,500.
The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.
Social Security Wage Base for 2020 Announced
On October 10, 2019, the Social Security Administration (SSA) announced that the 2020 Social Security wage base will be $137,700, which is an increase of $4,800 from $132,900 in 2019.
There is no limit to the wages subject to the Medicare tax; therefore, all covered wages are still subject to the 1.45% tax. As in 2019, wages paid in excess of $200,000 in 2020 will be subject to an extra 0.9% Medicare tax withholding that will only be withheld from employees' wages, as employers do not pay the extra tax.
The Federal Insurance Contributions Act (FICA) tax rate, which is the combined Social Security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2020 up to the Social Security wage base. The maximum Social Security tax employees and employers will each pay in 2020 is $8,537.40. This is an increase of $297.60 from $8,239.80 in 2019.
The Social Security wage base for self-employed individuals in 2020 will also be $137,700. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined Social Security tax rate of 12.4% and Medicare tax rate of 2.9%) up to the Social Security wage base. In 2020, the maximum Social Security tax for a self-employed individual will be $17,074.80.
For a copy of the SSA Fact Sheet please visit www.ssa.gov.
Your prior year W-2s are online!
To access you W2: log on to Inside Loyola. Under Web Advisor expand Web Advisor for Faculty/Employees/Students, click on "Employee Profile" then "Tax Information".
Once you consent to the electronic version, click on the tax year of the form you want to view. If the form appears but no amounts in the boxes, save the PDF and reopen from Adobe.
For Students: Under Web Advisor, Click on "Financial Information" then "Tax Information".