What To Do If Your Employees Are Complaining About Their Tax Refund

The IRS made wholesale changes to the W-4 in 2020. The form was changed to allow more accurate withholdings due to the changes in the tax code related to the Tax Cut And Jobs Act passed in 2017. This legislation eliminated personal exemptions, increased the standard deduction, and made the child credit available to more people.

Because employers and employees were not required to fill out new W-4s and the perceived complexity of the new process, many employees have still not completed a new W-4. This has caused significant confusion among employees and inaccurate withholdings. When employees are faced with a smaller-than-expected or no refund, they typically blame the employer. 

To avoid this issue, it is recommended that employers ask their employees to review their filing status and complete a new W-4 to ensure the correct withholdings.

The W-4 is completed whenever an employee starts a new job or modifies their withholding status and is an important compliance piece for payroll administrators. 

Steps 2, 3, and 4 can require more work for taxpayers with more than one job, have dependents, and/or a working spouse. 

The Estimator is quite detailed and will require information from current paystubs, any bonuses expected for the current year, retirement or other income, contributions to 401K, child care, health insurance, and more.Steps 3 and 4 are straightforward. Step 3 is used to claim deductions for dependents. Step 4 allows for additional income with no withholding, deductions outside of standard deductions, and additional withholding the employee may want to add to the calculated withholding amount.