2020 Income Tax Withholding Tables | Changes & Examples

Updates to the Income Tax Withholding Tables and What You Need to Know

Income Tax Withholding Tables

Like past years, the IRS released changes to the income tax withholding tables for 2020. In addition to new wage brackets, there are significant changes to how employers will handle tax withholding. These changes are in response to the Tax Cuts and Jobs Act of 2017.

When you have employees, you need to stay on top of changing employment tax rates. Rates impact the amount of money you withhold from employee wages. Are you familiar with the 2020 income tax withholding tables and the changes to the income tax withholding process?

Below, you will first find information about how withholding tables work. Then, you can learn about changes to the federal withholding tables.

What are income tax withholding tables?

You must use an employee’s Form W-4 and the income tax withholding tables to determine how much federal income tax to withhold from employee wages.

New hires are required to fill out Form W-4, Employee’s Withholding Certificate, when they start working at your business. There is a new W-4 form designed for 2020. On this form, employees can enter personal information, declare multiple jobs or a working spouse, claim dependents, and make other adjustments.

Once you have an employee’s Form W-4 information, use the income tax withholding tables in IRS Publication 15-T to determine federal income taxes. These tables provide ranges based on pay frequency, filing status, and how the employee fills out Form W-4.

There are two main methods (with a number of 2020 tweaks, explained below) employers can choose from to determine an employee’s federal income tax withholding:

  • Wage bracket method
  • Percentage method

Wage bracket method

If you use the wage bracket method, you must find the range the employee’s wages fall under. Then, using the information they entered on Form W-4, find the amount to withhold.

Percentage method

The percentage method is a little different. Like the wage bracket method, there is a range that an employee’s wages can fall under. But unlike the wage bracket method, there is both a flat dollar amount as well as a percentage calculation to add together.

Free trial of Patriot's Payroll Software

2020 income tax withholding tables

The Tax Cuts and Jobs Act of 2017 brought changes in tax rates and brackets, an increase in the standard deduction, the elimination of personal exemptions, and a new W-4 form.

In 2018, federal income tax withholding tables changed significantly from 2017 to reflect the tax act. These changes increased many employees’ paycheck amounts throughout the year.

However, many workers found that they either owed money or received a smaller tax refund. To increase withholding accuracy, the IRS created an updated Form W-4, again shaking up tax withholding.

You must adjust your payroll tax withholding to reflect the 2020 changes to income tax withholding tables. If you use online payroll software, the information will automatically update.

The IRS also updated their federal tax calculator for withholding in 2020. Individuals can use this tax calculator to determine their tax liabilities.

The 2020 Form W-4 eliminates withholding allowances. This change reflects the elimination of personal exemptions, which began in 2018.

income tax withholding tables updates

There are three big takeaways from these 2020 changes that will impact employee tax withholding and liabilities:

  • New W-4 form
  • Federal income tax table changes
  • Standard deduction increase

New W-4 form

In the past, employees could claim withholding allowances on Form W-4. The more allowances an employee claimed, the less you would withhold in federal income tax. But, employees can no longer claim allowances on the 2020 version of Form W-4.

This elimination of withholding allowances affects the structure of the 2020 withholding tax table. Tax tables no longer have columns for withholding allowances. Instead, you determine income tax withholding based on the employee’s wages, filing status, and pay frequency.

If employees want to lower their tax withholding, they can claim dependents or use the deductions worksheet on Form W-4.

Employees whose first paycheck is in 2020 or beyond must fill out the new Form W-4. Employees hired before 2020 do not need to fill out a new form. You can withhold income taxes using withholding allowances for these employees.

Federal income tax table changes

The federal income tax table brackets change annually. In addition to these regular amount variances, the IRS made significant changes to the tables themselves.

So, what are the 2020 income tax withholding tables like without allowances? Instead of different amounts for different allowances, there is now a “Standard withholding” and a “Form W-4, Step 2, Checkbox withholding” amount.

In addition to these table structure differences, a few more income tax withholding methods were thrown into the mix. Now, the federal withholding tax table you use depends on which version of Form W-4 an employee has filled out and whether you automate payroll or do it manually.

Here are the newly released federal income tax withholding methods available for determining an employee’s federal income tax withholding:

  1. Percentage method tables for automated payroll systems
  2. Wage bracket method tables for manual payroll systems with Forms W-4 from 2020 or later
  3. Wage bracket method tables for manual payroll systems with Forms W-4 from 2019 or earlier
  4. Percentage method tables for manual payroll systems with Forms W-4 from 2020 or later
  5. Percentage method tables for manual payroll systems with Forms W-4 from 2019 or earlier

Again, your method depends on which version of Form W-4 you use and whether you automate payroll.

If you use a form from before 2020, you can use options 3 or 5.

If you use Forms W-4 from 2020 or later and handle payroll by hand, you can choose between options 2 and 4.

And, last but not least, if you use Forms W-4 from 2020 or later and an automated payroll system, use option 1.

There are also two additional methods the IRS offers:

  1. Alternative methods for figuring withholding
  2. Tables for withholding on distributions of Indian gaming profits to tribal members

You can view all of the income tax withholding table methods in IRS Publication 15-T.

Which income tax withholding method should you use?

Forms W-4 from 2019 or earlier:

  • Wage bracket method tables for manual payroll systems with Forms W-4 from 2019 or earlier
  • Percentage method tables for manual payroll systems with Forms W-4 from 2019 or earlier

Forms W-4 from 2020 or later AND manual payroll:

  • Wage bracket method tables for manual payroll systems with Forms W-4 from 2020 or later
  • Percentage method tables for manual payroll systems with Forms W-4 from 2020 or later

Forms W-4 from 2020 or later AND automated payroll system:

  • Percentage method tables for automated payroll systems

To use the new 2020 income tax withholding tables that correspond with the new Form W-4, you must find the employee’s adjusted wage amount. You can do this by using the worksheet that the IRS provides in Publication 15-T.

Standard deduction increase

Here are the standard deduction amounts for 2020, along with 2017, 2018, and 2019 rates.

Filing Status Standard Deduction (2020) Standard Deduction (2019) Standard Deduction (2018) Standard Deduction (2017)
Single $12,400 $12,200 $12,000 $6,350
Married Filing Jointly $24,800 $24,400 $24,000 $12,700
Married Filing Separately $12,400 $12,200 $12,000 $6,350
Head of Household $18,650 $18,350 $18,000 $9,350

What about supplemental and backup withholding tax rates?

In 2018, supplemental wages and backup withholding rates changed, too.

Withholding on supplemental wages fell from 25% in 2017 to 22% in 2018. The backup withholding rate fell from 28% in 2017 to the updated 24%.

How do these rates compare in 2020?

Both the supplemental wage rate of 22% and the backup withholding rate of 24% remain the same in 2020.

How will these changes affect employees? Examples

So, what do the adjusted federal income tax brackets and repeal of withholding allowances mean for your employees? Take a look below.

We’ll compare the wage bracket method tables for the 2020 Form W-4 and the wage bracket method tables for the pre-2020 Form W-4.

Wage bracket method tables: 2020 Form W-4

Let’s say you have a single employee who earns $2,000 biweekly. They filled out the new 2020 Form W-4.

The employee has a relatively simple tax situation. When they filled out Form W-4, they wrote that they did not have another job or a working spouse. And, they did not claim dependents. They did not request any extra withholding.

Use the wage bracket method tables for manual payroll systems with Forms W-4 from 2020 or later to find out how much to withhold for federal income tax. To use the new tables, use Worksheet 2 in IRS Publication 15-T.

The worksheet is broken down into four steps:

  1. Adjust the employee’s wage amount
  2. Figure the tentative withholding amount
  3. Account for tax credits
  4. Figure the final amount to withhold

1. Adjust the employee’s wage amount

To use the new federal withholding tax table that corresponds with the new Form W-4, first find the employee’s adjusted wage amount. You can do this by completing Step 1 of Worksheet 2.

Because the employee’s tax situation is simple, you find that their adjusted wage amount is the same as their biweekly gross wages ($2,000).

2. Figure the tentative withholding amount

Now, use the 2020 income tax withholding tables to find which bracket $2,000 falls under for a single worker who is paid biweekly.

You find that this amount of $2,000 falls in the “At least $1,985 but less than $2,015” range.

Using the chart, you find that the “Standard withholding” for a single employee is $175. This is the tentative withholding amount you will enter into Step 2.

3. Account for tax credits

With the new system, your work isn’t done. Now, you need to account for any dependents the employee claimed on Form W-4.

Because the employee didn’t claim any dependents, the employee’s tentative withholding amount is still $175.

4. Figure the final amount to withhold

Your last step for determining federal income tax withholding is to enter any additional amounts the employee requested withheld on Form W-4.

In this situation, the employee didn’t request extra withholding. So, the amount to withhold from the employee’s wages each pay period is $175.

Wage bracket method tables: 2019 or earlier Form W-4

Now, let’s see how much you would withhold from the employee’s wages if they had filled out a Form W-4 from 2019 or earlier.

Again, you have a single employee who earns $2,000 biweekly. But now, you bring withholding allowances back into the picture. We’ll look at the employee’s federal income tax withholding for situations where they claim 0 allowances and 1 allowance.

To determine federal income tax withholding, use the wage bracket method tables for manual payroll systems with Forms W-4 from 2019 or earlier. And, use Worksheet 3 in IRS Publication 15-T to help with withholding.

Unlike Worksheet 2, Worksheet 3 is only broken down into two steps:

  1. Figure the tentative withholding amount
  2. Figure the final amount to withhold

1. Figure the tentative withholding amount

First, determine the employee’s tentative withholding amount. The employee’s total taxable wages this payroll period are $2,000.

Use the biweekly table for single employees and find the range $2,000 falls into. You find that this amount of $2,000 falls in the “At least $1,980 but less than $2,020” range.

Again, we’re going to look at both the withholding amount for 0 and 1 allowance claimed:

  • $246 if the employee claimed 0 withholding allowances
  • $210 if the employee claimed 1 withholding allowance

2. Figure the final amount to withhold

Lastly, enter any additional amounts the employee requested withheld on Form W-4.

In this situation, the employee didn’t request extra withholding.

If the employee claimed 0 withholding allowances on Form W-4, you would withhold $246 from their wages. If the employee claimed 1 withholding allowance on Form W-4, withhold $210.

Regardless of whether the employee claimed 0 or 1 withholding allowance, you would withhold more money from their wages than with the 2020 income tax withholding tables that correspond with the new 2020 Form W-4.

Keeping up with changing tax rates can be challenging when you’re a busy business owner. With Patriot’s payroll for small business, you don’t need to worry about tracking changes or doing complicated calculations. Our software is updated to reflect current tax rates, and we do the calculations for you. Start your free trial today!  

This article has been updated from its original publication date of 1/29/2018. 

This is not intended as legal advice; for more information, please click here.