“The IRS has created a new spreadsheet-based tool that’s designed to help small businesses navigate a variety of situations involving their employees to help ensure the right amount of withholding.”

– IRS Commissioner Chuck Rettig

The new year brings big changes in payroll tax withholding for employees and employers alike. A new withholding system — in effect as of Jan. 1 — moves away from the previous system, which was based on withholding allowances. A redesigned 2020 Form W-4, Employee’s Withholding Certificate will help employees manage the changes.

Employers who use automated payroll systems may continue to rely on their software for the calculations. However, employers that figure withholding manually may need additional support. To help employers get this important payroll calculation right, the IRS has launched a new online assistant that can help determine how much federal income tax to withhold from workers’ pay.

Known as the Income Tax Withholding Assistant for Employers, this new spreadsheet-based tool is designed to help employers transition to the redesigned withholding system. It provides support for new withholding requests from employees who fill out the new Form W-4. It can also help employers properly withhold from employees who still have a withholding request on file using an earlier version of Form W-4, which was based on withholding allowances.

Now available as a free download, the Income Tax Withholding Assistant for Employers is designed to help any employer who would otherwise figure withholding manually, using a worksheet and either the percentage method or the wage bracket tables found in Publication 15-T, Federal Income Tax Withholding Methods. Employers who already use an automated payroll system won’t need this new assistant.

The Income Tax Withholding Assistant for Employers is available in Microsoft Excel. Employers create a profile for each employee in the spreadsheet, and the tool uses the profile data to automatically calculate his or her correct federal income tax withholding.

For more information about the Income Tax Withholding Assistant for Employers, the redesigned 2020 Form W-4, and other tax topics of interest to employers and small businesses, contact your CRI advisor.