• What This Process Does


    Set up to enable both Federal tax calculations based on IRS instructions prior to year 2020 and new instructions as of January 1, 2020. 

                           

    Requirements


    IMPORTANT PLEASE READ: Clients must now use two different Federal deductions to allow for the two different calculations. 

    • A new Deduction Description Identification named FEDERAL2020 will be used for the calculation instructions as of January 1, 2020. 
    • Employees that have changed the W-4 as of January 1, 2020 or new employees that begin work as of January 1, 2020 must complete a 2020 (or current year) W-4 and will need the FEDERAL2020 deduction. 
    • Employees that have not changed their W-4 as of January 1, 2020 will continue to use the existing FEDERAL deduction. 
                           

    INSTRUCTIONS FOR PROGRAM UPDATES: 

                           

    In order to build the new FEDERAL2020 deduction description with the new 2020 table and setup, do the following steps:

  •  Run separate resources during program updates; The Select All button will not run these separate required resources
  •  After Payroll updates are run, scroll down to highlight number 60 and click on Select at the bottom (eye icon). 
  • Do the same for resource number 62; This will add the FEDERAL2020 Deduction Description and build the new tax tables for that Deduction 
  • Go to Payroll - Setup - Deductions - Deduction Descriptions and verify that the FEDERAL2020 Deduction Description has been added 
  • Select the FEDERAL2020 deduction and add the Vendor ID and Address as well as the Employer ID and Deduction Account
  •  Go to the Compute tab and click on Copy Standard Setup and select. This will pull in the most up to date tax tables.  
  • Important Note:  The resource number 62 is only used to build the FEDERAL2020 Deduction Description if it doesn't already exist.  If it does already exist, only the resource number 60 is required to update all tax tables.     
                                                            

Process 

                       

The FEDERAL2020 Deduction will have a different setup on the Compute tab. The Allow Standard Deduction and Allow Exemptions boxes will be greyed out. New boxes have been added on each line, Use Personnel Deduction which will be checked for both. These indicators will point to the employee’s FEDERAL2020 deduction for additional W-4 information. 



Complete the Exemptions tab on the employee’s FEDERAL2020 deduction based on information provided by the employee on the form W-4. Additional amounts that the employee has designated on the W-4 will continue to be placed in the Adjustment/Additional Amount field.



If the employee has marked “EXEMPT” on their W-4 or state form, go to the FEDERAL/STATE deduction as applicable, click Select, flag Exempt at the top of the screen, and click Save; this will result in wages being taxable for FEDERAL/STATE as normal, but tax withholding to be blocked.  If you are not sure that this is the correct scenario for the employee, consult with RDA or your tax accountant.


 In 2024, the top tax rate of 37% applies to those earning over $609,350 for individual single filers, up from $578,125 last year. Meanwhile, the lowest threshold of 10% applies to those making $11,600 or less, up from $11,000 in 2023. That means how much you pay in taxes could be higher or lower this year than in 2023. 


To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Encourage your employees to file an updated Form W-4 for the new year, especially if they owed taxes or received a large refund when filing their previous year tax return.


The IRS recommends that employees use the Tax Withholding Estimator to assist in filling out the form W-4:

https://apps.irs.gov/app/tax-withholding-estimator


Please use these helpful links to learn more about the Federal W-4: 

https://www.irs.gov/newsroom/faqs-on-the-2020-form-w-4