Did you know the IRS changed the Form W-4 in 2020? You are not alone if you did not. Many employers did not disclose this to employees because the previous form is still valid, and updating W-4s is not required unless there is a specific request to change withholdings.

Claim Zero

You may be familiar with the tax adage “just claim zero” when completing a W-4 at a new job. Claiming zero means withholding the maximum amount of taxes from each paycheck, potentially resulting in a bigger refund at tax time (and minimizing the fear of having to pay in). It is based on a generalized “allowance” system that estimates exemptions.

What Changed?

The new W-4 eliminates allowances and simplifies withholding to match your actual tax situation. It has direct inputs for income, credits (such as the Child Tax Credit), and deductions, ensuring better accuracy (especially for dual earners and freelancers) by using a specific dollar amount (instead of allowances).

Word of caution: “zero” on the new form means “zero dollars” withholding… and may cause a big bill at tax time!

While it is not mandatory to update your W-4 if you filed a pre-2020 form, it is certainly worth the effort. Life changes — marriage, kids, new jobs, or side hustles — can shift your tax needs. A fresh W-4 ensures your paycheck reflects your current tax situation, avoiding big tax bills or oversized refunds (which are just interest-free loans to the IRS – yuck!)

Do not let outdated withholdings or the new form structure catch you off guard. Check out the user-friendly IRS estimator tool (irs.gov/w4app) or lean on your KT advisors to update your W-4 with your employer today. It may feel like a small step for better financial control in 2025 — but your wallet will thank you!