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Small Business Assistant

A new downloadable assistant helps small businesses withhold the right amount of income tax


The Internal Revenue Service has launched a new online assistant designed to help employers, especially small businesses, easily determine the right amount of federal income tax to withhold from their workers’ pay.


Known as the Income Tax Withholding Assistant for Employers, this new spreadsheet-based tool is designed to help employers easily transition to the redesigned withholding system (no longer based on withholding allowances), which goes into effect on Jan. 1. It does this by helping them easily implement new income-tax withholding requests from employees who fill out the completely redesigned 2020 Form W-4, Employee’s Withholding Certificate.


At the same time, the tool can also help employers continue to properly withhold from employees who still have a withholding request on file using a past version of the W-4, which was based on withholding allowances.


“We’ve been working closely with the payroll community and other partners to make improvements in the withholding process,” said IRS Commissioner Chuck Rettig. “As part of this effort and based on feedback from partners, 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.”


Now available for download, without charge, on IRS.gov, 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 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 because their system already does the math.


The Income Tax Withholding Assistant for Employers is available in Microsoft Excel. The employer can use the tool to create a profile for each employee that then automatically calculates their correct federal income tax withholding.


To use the Income Tax Withholding Assistant for Employers, the employer starts by indicating their pay period frequency (for example, weekly, bi-weekly, monthly, etc.), and then enters key information from an employee’s Form W-4. For the tool to work properly, the employer must indicate whether the employee submitted a 2020 Form W-4, which does not base withholding on the number of withholding allowances claimed, or a prior version of the W-4, which does.


The employer can then save a separate customized copy of the file for each employee containing that employee’s Form W-4 information. Then, each pay period, the employer simply opens the employee’s file and enters their gross wage or salary amount for that pay period. The tool will then automatically display the correct amount of federal income tax to withhold from that employee’s pay.


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 can be found on IRS.gov.

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