Tax Rates for 2020
The Employee Social Security rate remains 6.2%, as in 2019. The taxable wage limit for this tax is $137,700. The maximum Social Security tax that an employee will pay in 2020 is $8,537.40.
All wages are still subject to the 1.45% Medicare tax rate. Additionally, wages over $200,000 are subject to an additional 0.9% Medicare tax, for a total Medicare Tax of 2.35% on wages over $200,000.
California State Disability Tax
The State Disability Insurance (SDI) rate remains 1%, as in 2019. The California taxable wage limit for this tax is $122,909. The maximum California SDI tax that an employee will pay in 2020 is $1,229.09.
2020 Form W-4
The 2020 Form W-4, Employee's Withholding Certificate, is very different from previous versions. This is due to the federal tax law changes that took place in 2018. The Internal Revenue Service (IRS) is not requiring all employees to complete the revised form and has designed the withholding tables so that they will work with both the new and prior year forms. However, certain employees will be required to use the new form: those hired in 2020 and anyone who makes withholding changes during 2020.
Even though the IRS does not require all employees to complete the revised form and even if your tax situation has not changed, we recommend you perform a "paycheck checkup" to see if you need to make adjustments to your current withholding. To conduct the checkup, you use the IRS's Tax Withholding Estimator. To effectively use the estimator, it is helpful to have a copy of your most recent pay stub and tax return. Please note: if you do not submit a new form, withholding will continue to be based on your previously submitted form.
If you wish to submit a new Form W-4, you can do so by logging into Employee Self Service in WaveNet. Under the Employee tab, choose Employee Self Service. Then, click on the My Payroll tile, and then click on W-4 Tax Information to complete the form.
Before completing the 2020 Form W-4, please read the instructions that are included with the form. You must complete Steps 1 and 5. Steps 2, 3, and 4 are optional, but completing them will help ensure that your federal income tax withholding will more accurately match your tax liability. Step 1 is for your personal information; Step 2 is for households with multiple jobs; Step 3 is used to claim tax credits for dependents; Step 4 is for other adjustments (additional income such as interest and dividends, itemized deductions that exceed the standard deduction, and extra tax you want withheld); and Step 5 is where you sign the form.
The IRS takes your privacy seriously and suggests that if you are worried about reporting income from multiple jobs in Step 2 or other income in Step 4(a), you can check the box in Step 2(c) or, enter an additional withholding amount in Step 4(c). To determine the additional withholding amount, you can use the withholding estimator.
The IRS has also published Frequently Asked Questions that you may find helpful as you complete the form.
Please keep in mind Pepperdine University cannot provide personal tax advice. You are encouraged to consult with your personal tax advisor for specific questions on the form, or information on how the recent tax changes might impact your individual tax filings or withholding elections.