I made a mistake on my 2019 W4 form by claiming way too many dependents (10). I don't know how I ended up with this number but it was seriously wrong since I only have 3 dependents. At the time, while claiming 10 dependents (2019), my check's federal taxes was around 200-250.
When I did my taxes this year I knew I'd end up paying some taxes and it ended up being pretty high around 5k paying back to federal. I talked to our payroll admin and filled out a new form (W4) from the IRS. This new form has changed for 2020. Instead of entering the number of dependents you enter in the number of dependents and multiply it by $2000.
I entered $6000 as I have 3 dependents (really I should enter $8000 (4 dependents) to claim my wife as well as she does not work, but I decided it was ok to pay a little more taxes).
Upong filling out this new form it made my federal taxes worse (I paid much less)! You would think having 10 dependents in 2019 and paying around 200-250 for federal taxes vs now 3 dependents (on the form $6000) in 2020 would make a difference where I'd pay more federal taxes. Now with these changes I only pay around 70-100 dollars per pay check. I thought maybe this was a timing issue and that I needed to give it some weeks to "settle down", but still its coming back with $75-$100 paying for federal taxes (seems way too low).
Only federal seems to be wrong on my paycheck (Social Security, State Taxes (MICH.), etc are all correct - just federal seems wrong). We have exhausted all options thinking it was the company that cut our checks but they said all is well on their end showing 3 dependents. Our payroll admin did some research and stated that this new form has a different algorithm or calculation behind it and that I should just enter an additional amount in item 4c from the 2020 w4 form. Item 4c from the form states the following:
(c) Extra withholding. Enter any additional tax you want withheld each pay period .
So she mentioned entering an amount here, say another 200 bucks, into this field (4c) of this 2020 w4 form.
Has anyone else experienced this? What happened to this form and why did it change in terms of calculations or algorithm? Why did it go from number of dependents to an amount in $$$?
Here is the form: https://www.irs.gov/pub/irs-pdf/fw4.pdf I don't want to end up with this same situation where I am paying thousands of dollars back to the federal government when I usually get back around 4-5k.