Author: Ketel Thorstenson, LLP

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Important Notice- KTLLP Office Lobbies Closure

As are most CPA firms in the country, for the safety of clients and staff, we are closing our office lobbies starting this Monday, March 23.  For the remainder of this week, March 20-21, we are asking clients to drop off their tax information to our front desk Friday from 7 a.m. to 5 p.m. or Saturday from 8:00 a.m. to noon.

If that’s not possible, we do have other options.
Electronic File Transfers– will allow you to send documents securely. Visit the button on ktllp.cpa under Client Portal. There is also a button with Client Portal instructions if you need assistance. Please do not use normal email to send documents with sensitive information. This is the quickest delivery method.

Office Drop Box- there are drop boxes located at the following offices, Rapid City (drop box by employee entrance just east of our normal front door), Spearfish (slot at back door, if documents don’t fit please call front desk to make arrangements), and Custer (slot at front door). During business hours the breezeway in the Gillette office will be open to document drop offs.

U.S. Mail- is also a great option in lieu of coming to our physical office.

PLEASE NOTE: all mail and dropped off documents will be quarantined for 48 hours.

We encourage you to conduct as much business virtually as possible, including rescheduling in-person meetings to phone or video calls.

Rest easy. The tax deadline has been extended to July 15, and that is when payments are due.

If you pay taxes quarterly, the first quarter 2020 payments are not due until July 15. 

We believe you will not need to pay any 2020 quarterly taxes until July 15. We will keep you posted as to the status of your filing. If you have any need to file quickly, please let us know.                

Check our website at ktllp.cpa and social media for updates related to the pandemic.

We appreciate your cooperation in these trying times.

Sincerely,
Denise Webster, CPA, PFS, Managing Partner
March 20, 2020
| Ketel Thorstenson, LLP
KT Insights
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UPDATED: Families First Coronavirus Response Act

UPDATED MARCH 24, 2020

On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (H.R. 6201).  Employers are required to implement this law on April 1st.  The cost of these benefits is funded by the US Treasury through a tax credit discussed below.   By April 1st every affected employer will need to provide informational notice of these benefits to employees.  The notice will be published by the government on March 25.  All legislation ends on December 31, 2020.  This blog outlines the key provisions that directly impact employers.

1. Emergency Family and Medical Leave Expansion Act – Under this act, eligible employees may take up to 12 weeks of leave if the employee is unable to work (or telework) because their child’s (under the age of 18) school or daycare provider is closed or unavailable due to a coronavirus emergency/declaration.

Eligible employees include those who work for employers with fewer than 500 employees and government employers who have been on the job for at least 30 days.  There is no distinction between full-time or part-time employees.  All employees who meet the above are covered.  The legislation does authorize an exemption for employers with less than 50 employees, only if the requirements would jeopardize the viability of their business.  Employers who are health care providers or emergency responders may also elect to exclude their employees from this bill.

Under this bill, the first 10 days of leave are unpaid.  However, employers may require employees to use any appropriate accrued leave (vacation, PTO, sick, etc.).  After 10 days employers are required to pay the employee at an amount not less than two-thirds of the employee’s regular rate of pay up to $200 per day or $10,000 in total.

Once an employee comes back to work generally, they are entitled to be reemployed to the position they held when the leave began or to obtain an equivalent position.  For employers with fewer than 25 employees, the employer does not need to return the employee to their position if:

The position does not exist due to changes in the employer’s economic or operating conditions caused by a coronavirus related situation;

The employer makes “reasonable efforts” to restore the employee to an equivalent position; and

If these efforts fail, the employer makes an additional reasonable effort to contact the employee if an equivalent position becomes available within a one-year window beginning on the earlier of a) the date the employer no longer needs to take leave or b) 12 weeks after the employee’s leave begins.

2. Emergency Paid Leave – Under this act employers must provide employees with two weeks of paid sick leave if the employee is unable to work (or telework) for the following coronavirus related reasons: 

  • The employee is subject to a federal, state, or local quarantine or isolation,
  • The employee has been advised by a health care provider to self-quarantine,
  • The employee experiences symptoms of coronavirus and is seeking medical diagnosis,
  • The employee is caring for an individual who is subject to a quarantine or isolation order or has been advised to self-quarantine by a medical provider,
  • The employee is caring for a child (under the age of 18) whose school or daycare provider is closed or unavailable due to coronavirus precautions, and
  • The employee is experiencing any other conditions substantially similar to coronavirus, as specified by the Department of Health and Human Services.

Eligible employees include those working for private sector employers with fewer than 500 employees, government employers, and all non-private entity employers with more than one employee.   Employers are to provide leave regardless of how long the employee has been employed and their employment status (full-time or part-time).  All employees who meet the above are covered.  The legislation does authorize an exemption for employers with less than 50 employees, only if the requirements would jeopardize the viability of their business.  Employers who are health care providers or emergency responders may also elect to exclude their employees from this bill.

The bill outlines the following regarding the amount of leave to be provided.

  • Full-time employees are entitled to 80 hours of paid sick leave;
  • Part-time employees are entitled to the number of hours that the employee works, on average, over a two-week period; and
  • For employees who hours vary based on a schedule, the employee’s paid leave rate should equal the average number of hours that the employee was scheduled per day over the two-week period.

An employer may not require an employee to use other paid leave provided by the employer before the employee uses the paid sick leave available under the Act. Any unused paid sick leave will not carry over from year to year and is not paid out if an employee separates employment.

The paid sick leave rate may not exceed $511 per day or $5,110 in total for an employee who takes paid sick leave because they are subject to quarantine/isolation related to a coronavirus situation, have been advised by a medical provider to self-quarantine, or are experiencing coronavirus symptoms.

The paid sick leave rate may not exceed $200 per day or $2,000 in total for an employee who takes paid sick leave because they need to take care of another individual or child experiencing coronavirus symptoms, or because they themselves experience another substantially similar illness.

Employers must post information about the emergency paid sick leave and its eligibility requirements within seven days of the enactment of the bill.  Model notices will be provided by the Secretary of Labor.

Employers may not discharge, discipline, or discriminate against any employee who takes paid sick leave or files a complaint or proceeding or testified in ay proceeding related to Families First Coronavirus Response Act (H.R. 6201).

3. Tax Credit (information from the IRS)

The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing coronavirus-related leave to their employees (Families First Coronavirus Response Act).

  • Key Takeaways
    • Complete Coverage – Employers receive 100% reimbursement for paid leave pursuant to the Act
      • Health insurance costs are also included in the credit
      • Employers face no payroll tax liability
      • Self-employed individuals receive an equivalent credit
    • Fast Funds – Reimbursement will be quick and easy to obtain.
      • An immediate dollar-for-dollar tax offset against payroll taxes will be provided
      • Where a refund is owed, the IRS will send the refund as quickly as possible
    • Small Business Protection – Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or childcare is unavailable in cases where the viability of the business is threatened.
    • Easing Compliance – Requirements subject to 30-day non-enforcement period for good faith compliance efforts.
    • To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.
  • Eligibility
    • Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act.
    • Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date and December 31, 2020.
    • Equivalent credits are available to self-employed individuals based on similar circumstances.

  • Emergency Paid Sick Leave Tax Credit
    • Eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days if the employee took leave for one of the following.
      • The employee is subject to a federal, state, or local quarantine or isolation
      • The employee has been advised by a health care provider to self-quarantine
      • The employee experiences symptoms of coronavirus and is seeking medical diagnosis
    • Eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days.
      • The employee is caring for an individual who is subject to a quarantine or isolation order or has been advised to self-quarantine by a medical provider
      • The employee is caring for a child (under the age of 18) whose school or daycare provider is closed or unavailable due to coronavirus precautions
      • The employee is experiencing any other conditions substantially similar to coronavirus, as specified by the Department of Health and Human Services
    • Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

  • Child Care Leave Credit
    • eligible employers may receive a refundable childcare leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate.
    • Up to 10 weeks of qualifying leave can be counted towards the childcare leave credit.
    • Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

  • Prompt Payment for the Cost of Providing Leave

Under guidance that will be released soon, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

If there are not sufficient payroll taxes to cover the cost of qualified sick and childcare leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced soon.

Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.

  • Small Business Exemption

Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or childcare unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer’s business as a going concern. Labor will provide emergency guidance and rulemaking to clearly articulate this standard.

  • Non-Enforcement Period

Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.

This is a summary of the provisions in the legislation enacted on Wednesday, March 18. We understand that this new law raises many questions about administration of these benefit plans. We will continue to monitor information as it is provided by the government and other resources and will be providing regular updates via our website and social media.

March 19, 2020
| Ketel Thorstenson, LLP
KT Insights
 |

South Dakota COVID-19 Reemployment Assistance Program

South Dakota Department of Labor and Regulations has added provisions for employees who have lost their job through no fault of their own due to a COVID-19 related situation.  Employees who become unemployed because their employer temporarily closes or is quarantined due to COVID-19 might be eligible for reemployment assistance.  They call these “RA benefits,” and are essentially enhanced unemployment benefits.

While the Department of Labor examines each case individually for eligibility here are some proposed scenarios and the potential interpretations (scenarios and information provided by South Dakota Department of Labor and Regulations).  For more details see the Department of Labor and Regulations website at https://dlr.sd.gov/ra/covid_19_ra_eligibility.aspx.

Proposed Scenario Interpretations:

  1. A worker has tested positive for COVID-19 and is temporarily unable to work. – ELIGIBLE for RA benefits. A claim would need to be filed online at raclaims.sd.gov or by phone at 605.626.3179. Workers who are temporarily unemployed and expected to return to work with their employer would not be required to actively seek work each week. As of now, a layoff lasting longer than 10 weeks would require the person to be able, available, and actively looking for work.
  2. A worker is out of work because their employer closed due to COVID-19. – ELIGIBLE for RA benefits. A claim would need to be filed online at raclaims.sd.gov or by phone at 605.626.3179. Workers who are temporarily unemployed and expected to return to work with their employer would not be required to actively seek work each week. As of now, a layoff lasting longer than 10 weeks would require the person to be able, available, and actively looking for work.
  3. A worker has their work hours reduced because of a reduction in force related to COVID-19. – LIKELY ELIGIBLE for PARTIAL RA benefits. Depending on the number of hours that have been reduced and the amount of earnings for the week, a person would be eligible for reduced RA benefits. 75% of earnings over $25 would be deducted from the weekly benefit amount. A worker would not be eligible if earnings were equal to or more than the weekly benefit amount.
  4. A worker is sent home from work because their employer thinks they are a risk, or they are at risk. – LIKELY ELIGIBLE for RA benefits. If the worker is not being paid by the employer while at home, the worker may be eligible for benefits. A claim would need to be filed online at raclaims.sd.gov or by phone at 605.626.3179. The worker would not be required to actively seek work each week. As of now, a layoff lasting longer than 10 weeks would require the person to be able, available, and actively looking for work.
  5. A worker chooses to self-quarantine and is unable to work. – INELIGIBLE for RA benefits. To receive benefits, an individual must be able and available to work.
  6. A worker is unable to work because they need to care for a dependent (e.g. child). – INELIGIBLE for RA benefits. To receive benefits, an individual must be able and available to work.
  7. A school worker is unable to work because their place of employment is closed. – LIKELY ELIGIBLE for RA benefits. South Dakota schools will stay closed through March 27 as a precaution to slow the spread of COVID-19. If the worker is not being paid by the employer while at home, the worker may be eligible for benefits. A claim would need to be filed online at raclaims.sd.gov or by phone at 605.626.3179. The worker would NOT be required to actively seek work each week.
  8. An employer decides to temporarily close or do a reduction in force because of COVID-19. – LIABLE for RA benefits. Benefit payments would be charged to an employer’s account.
March 19, 2020
| Ketel Thorstenson, LLP
KT Insights
 |

COVID-19 Guide for Unemployment in South Dakota

The Reemployment Assistance (RA) program provides temporary financial assistance for people who have lost their job through no fault of their own. Workers who become unemployed because their employer needs to temporarily shut down or isolate workers due to COVID-19 might be eligible to receive benefits. Many variables can affect a worker’s eligibility and an employer’s liability for benefits. The Department of Labor and Regulation examines each case on an individual basis and makes determinations in accordance with the law.

Here is the link to the the South Dakota Department of Labor website for program details and forms. https://dlr.sd.gov/ra/covid_19_ra_eligibility.aspx

March 18, 2020
| Ketel Thorstenson, LLP
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KTLLP Important Notice- Coronavirus Update

As Coronavirus (COVID-19) concerns continue to rise, we want to share what Ketel Thorstenson, LLP is doing in response. To avoid disruptions in client service, we are continuing to allow client-related travel and on-site meetings to take place where it is necessary. However, we want to work together with you to determine the best approach to meet your needs, while being mindful of the safety for your staff and ours. At this time we are still accepting tax appointment interviews. Please be assured we are closely monitoring developments and implementing several safety precautions across the firm. We are following the advice of the CDC and taking extra precautions to prevent the spread of the virus. We are continually disinfecting offices, declining handshakes, and keeping the recommended distance between people.

We encourage employees and clients to do their best in helping prevent the spread of illness:

  • Stay home if you’re not feeling well.
  • Wash your hands frequently and for at least 20 seconds with soap and water; use hand sanitizer, and don’t touch your face.

Additionally, we encourage postponement of appointments if you are not feeling well. However, we encourage everyone to simply drop off their tax return data and we can discuss any open issues over the phone or Zoom Video.

If you’ve never extended your tax return, this is the year to do that. Extending is not difficult. Your KTLLP professional can walk you through it.

The Treasury department announced that any 2019 taxes can be paid by July 15, 2020 without penalty. We are waiting more clarification. The deadline is still April 15, 2020. So if you want to pay your tax after April 15, 2020, you need to send in a simple extension without payment. We can do that for you.  Then you will have until October to file, and July 15 to pay.   There has been  no clarification as to whether 2020 estimated tax payments for quarters one and two can be deferred until July 15, 2020.

If you have any questions about the Coronavirus here is the link to the CDC’s designated website for the virus. https://www.cdc.gov/coronavirus/2019-ncov/index.html

Watch the KTLLP blog and social media channels for future updates.

March 14, 2020
| Ketel Thorstenson, LLP
KT Insights
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Safeguarding your Nonprofit’s Network

As malicious attacks continue to grow, it is imperative that nonprofit organizations of all sizes take the necessary steps to bolster their cybersecurity practices.  Nonprofit networks host a treasure trove of sensitive and valuable information making them an attractive target for hackers.  Limited budgets and small IT staffs make it difficult for many of these organizations to adequately secure their network and protect their clients’ and donors’ information.  However, there are a few areas organizations can focus on as their overall cybersecurity policies and practices continue to evolve. 

At the core of all cybersecurity policies is training.  Employee cybersecurity awareness training plays a critical role in protecting an organization from malicious threats.  Empowering users with the skills they need to identify, react to, and report the different forms of phishing emails, scams, and social engineering attacks directly reduces a hacker’s chances of success.  In addition to structured and recurring training, all employees need to be aware of their organization’s internal reporting procedures so they can effectively react in case of an incident.  When executed properly, a solid training program can transform employees from being an organization’s greatest security vulnerability, into its greatest defense asset.

Another focus area for nonprofits is controlling access to the network and its resources.  The first line of defense is a strong password policy.  Password complexity requirements, minimum reset timeframes, and settings to prevent the reuse of old passwords should all be part of this policy.  Organizations should also consider using strong passphrases with increased minimum character requirements.  Passphrases are easier to remember, but are harder to crack due to their increased length.  Additionally, all organizations should strongly consider implementing multi-factor authentication as part of their login process.  There are many applications available that integrate easily with existing technology, and dramatically improve an organization’s security posture.  Removing access to the network when employees or volunteers leave the organization is just as important.  Implementing a thorough off-boarding process will ensure prior employees no longer have access to critical information, and that their accounts are not left open for hackers to exploit.

Creating a software application inventory and ensuring updates and security patches are applied regularly is another way nonprofits can help safeguard their networks from malicious attacks.  Hackers are continuously looking for software vulnerabilities to exploit and wreak havoc on a network.  Understanding what programs are installed on the network and when they are no longer supported can help reduce the risks associated with unauthorized and outdated software. It is very difficult to secure and manage a network without the knowledge of what programs are installed. Additionally, nonprofits running Windows 7 without Extended Security Updates need to be aware of the risks associated with continuing to use an outdated operating system and should plan to upgrade to Windows 10 as soon as possible.

For more information on safeguarding your network, please perform an Internet search to review NTEN’s (Nonprofit Technology Enterprise Network) State of Nonprofit Cybersecurity 2018 report and Microsoft’s Nonprofit Guidelines for Cybersecurity and Privacy.

March 4, 2020
| Ketel Thorstenson, LLP
KT Insights
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Board Members Responsibilities for Form 990

A nonprofit board members’ review of Form 990 is not required, but the form encourages board participation and may provide several benefits to an organization. A draft of the form should be provided to board members, whether it is to everyone on the board or a select few, for review before filing.

What’s the big deal? The purpose of the Form 990 is to aide the IRS in determining continued tax-exempt status, ensuring the organization is following certain requirements and implementing best practices into everyday operations of the organization. The form is also easily accessible to the public, and potential donors can review the financial performance, policies, compensation of officers and more within the Form 990. 

The Form 990 contains a question regarding whether the governing board members were provided a copy of the Form 990 before it was filed.  All nonprofit organizations must describe the review process, if any, the organization’s governing board and management uses to review the Form 990.  Such description will be different for all nonprofits depending on size and operations. 

There are several benefits to the board’s review of Form 990:

  • An indication of better governance within the organization to outside parties.
  • Provides assurance to external parties that the organization intends to continue operating for tax-exempt purposes.
  • Provides an opportunity for members to inquire, understand, and be comfortable with information that will be available to the public once filed.
  • Assures external parties of greater accountability within the not-for-profit organization.

What should be reviewed? This varies based on the organization, but the main areas of concentration are typically on the mission of the organization, financial information, and anything else that would interest the IRS, potential donors, and any other readers. It is important to keep in mind the purpose of the form, which is to ensure the IRS that the organization is operating for tax-exempt purposes and not abusing their status as a nonprofit organization.

Examples of items that may be reviewed:

  • Mission/purpose of the organization and any changes from previous years
  • Financial information to detect any obvious errors or misstatements
  • Appropriateness of amounts reported for compensation, fundraising efforts, etc.
  • Related party transactions
  • Reporting on program accomplishments and activities (marketing opportunity)

Questions members may ask themselves when reviewing:

  • Does the information reported accurately depict the organization’s activities?
  • Does the organization appear to be operating as a nonprofit?
  • Does any information in the form appear questionable?

There are extensive checklists online that may direct a board member’s review of the Form 990.

If board member does not understand questions or information on the form, he or she should ask the preparer. In most cases, organizations request an external CPA prepare the Form 990.  Nonprofits should have the external CPA available for questions after the board has had time to review the draft. This provides an opportunity for the board to gain a better understanding of the form and feel more confident with the information being reported. 

For more information regarding the Form 990 or the board’s review of the Form 990, contact the nonprofit professionals at Ketel Thorstenson, LLP.

March 4, 2020
| Ketel Thorstenson, LLP
KT Insights
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Tax Tip: Hiring Your Child

If you own a business or a rental that is not in an S corporation or corporation, a nice deduction you can get is hiring your child that is under the age of 18.  The payments are not subject to social security or Medicare taxes plus they will reduce the taxable income in your business.  The wage to your child needs to be reasonable based on the work they are providing.  The wage will also allow your child to have earned income and be able to contribute into a Roth IRA during that year. 

Consult with your tax professional at Ketel Thorstenson about these or other tax matters because each situation is different. Don’t navigate the difficult and ever changing tax codes and legislation on your own.  Ketel Thorstenson CPAs and tax professionals receive advanced training and continuing education all year long to keep our service on the forefront of the tax industry. Call us today for guidance on tax planning, tax return preparation, and Tax Reform affects or questions.

February 11, 2020
| Ketel Thorstenson, LLP
KT Insights
 |

New Form I-9 Published

On January 31, 2020 the US Citizenship and Immigration Services (USCIS) published a new version of Form I-9.  Employers will have until May 1, 2020 to make the switch to the new form.  There are no changes from the current document that expired on October 21, 2019.

The Form I-9 was established in 1986 in order to verify the work eligibility of employees of US companies.  Except for a few exceptions, all employers must complete the Form I-9 for all of their employees hired after November 6, 1986.  The Form I-9 must be completed after a formal offer has been made and before the end of the employee’s third day of employment.

The Form I-9 isn’t lengthy, but failure to complete it correctly can be costly.  Here are a few tips for completing the Form I-9.

  • Be familiar with the acceptable documents an employee must present.  Take time to review the documents, make sure they are not expired, and only accept originals, no photocopies.  If you are not familiar with a document presented contact the US Citizenship and Immigration Services office (see website below).
  • Complete any necessary follow-up.  For certain citizenship statuses there is required follow-up; particularly if the employee’s document has an expiration date.  Make sure to set up a process in order to re-verify these documents as needed.
  • Store your forms appropriately.  The Form I-9 should not be stored in the employee’s personnel file.  They should be kept in a separate folder or binder in a secure location
  • Follow the retention guidelines.  The form must be retained the entire time the employee is employed with the company.  After separation of employment the employer is required to keep the form for three years after the employees start date or one year after the employees last day of employment, whichever is later.
  • Conduct regular internal audits.  It is best to review your forms annually.  Make sure that all current employees have a Form I-9 completed, make sure all forms are accurate and if errors are found appropriately correct them, and verify if you are required to retain the documents or not.

For more information on the Form I-9 or to download the Employer Handbook go to www.uscis.gov/i9.

February 3, 2020
| Ketel Thorstenson, LLP
KT Insights
 |

New Form W-4 Q&A

Effective January 1 all employers should have switched over to the IRS’s new Form W-4.  The new form has been redesigned in order to reduce the form’s complexity and increase accuracy.  The implementation of the new form has caused a lot of questions from both employers and employees.  Here are a few of the common asked questions and answers as outlined by the IRS (a complete listing of frequency asked questions can be found on the IRS website at https://www.irs.gov/newsroom/faqs-on-the-2020-form-w-4).

Employee Questions

  1. What steps of the form do I have to complete?
    1. The form is divided into 5 steps.  An employee is only required to complete two of the steps, step 1 and 5.  In step 1 the employee will provide their personal information and their filing status.  In step 5 they will sign the form.  Steps 2-4 are only completed if they apply.
  • What happens if I only complete steps 1 and 5?
    • The amount of your withholding will be calculated based on your filing status’s (as completed in step 1) standard deduction and tax rate.  No additional withholdings will apply.
  • If I want a refund when I file my tax return, how do I complete the form?
    • The new form is designed to more accurately withhold taxes from your pay.  Therefore, if you want to withhold more than the standard deduction and taxes from each paycheck you will need to put a dollar amount in Step 4(c).  You will then receive these monies back when you file your taxes.
  • I have multiple jobs.  How do I complete step 2?
    • Step 2 allows you to choose one of three options:
  • Step 2(a): Use the Tax Withholding Estimator (www.irs.gov/W4app) to determine the amount of withholding you will place in Step 4(c). To complete the estimator, you will need to know the approximate amount of pay for each job you have.  If your pay changes significantly at an of your jobs, you may have to complete a new Form W4.
  • Step 2(b): Use the Multiple Jobs Worksheet on page 3 of the form to determine the amount of withholding you will place in Step 4(c). To complete the worksheet, you will need to know the approximate amount of pay for each job you have.  If your pay changes significantly at any of your jobs, you may have to complete a new Form W4.  If you (and your spouse) have a total of two jobs and the pay at the higher paying job is more than double the pay at the lower paying job, it is advised by the IRS to use this method.
  • Step 2(c): If you (and your spouse) have a total of two jobs with similar pay it is advised by the IRS to use this method.  To use this option, you should complete a Form W-4 for each job with the box in Step 2(c) checked. The standard deduction and taxes will be divided evenly between the two jobs to calculate the withholdings. You will not need to furnish a new Form W-4 to account for pay changes at either job.

Employer Questions

  1. Do I need to have all my current staff complete a new Form W-4?
    1. No.  Only staff hired on or after January 1, 2020 must complete the new form.
  2. If a staff member hired prior to 2020 wants to update their Form W-4 in 2020 which form do we use?
    1. Any staff making changes to their withholdings after January 1, 2020 must use the new form.
  3. May I ask all my staff to complete a new Form W-4 no matter when they started?
    1. Yes, you can ask staff to complete a new Form W-4, but you can not make it required.  If the staff does not complete a new form their withholdings will be based on the most recent valid form completed.

To obtain the form and for other helpful information the IRS has set up a page for the new form, https://www.irs.gov/forms-pubs/about-form-w-4.

Follow KTLLP on social media for further updates.

January 28, 2020
| Ketel Thorstenson, LLP