Upcoming Changes to W-4 Form Warrant Your Attention
The W-4 is in for an overhaul, notes IRS.gov. It’s all about simplifying the withholding system currently in place. The changes aren’t too drastic, but it’s still something taxpayers need to know. Learn about some of the high-points of what’s different on the W-4 for 2020.
What’s a W-4 for Again?
The W-4 form calculates how much of an employee’s paycheck should be withheld for federal tax purposes. The form is always part of the new employee paperwork to help staff accountants establish the proper withholding amount. In addition, it also gives the employer the most accurate overview of each employee’s personal information and filing status.
What’s Changed?
Beginning in 2020, the revised W-4 will appear more straightforward and less complex than past forms. The IRS removed a lot of the complicated worksheets and instructional pages to create a simplified version that’s easier to digest. The goal is to reduce time and have less paperwork involved.
This is what’s changed:
- Allowances are no longer required
- Steps 1 and 5 are the only required fields to fill out
- Checking the box on step 1 makes withholding based on the employee’s filing status the standard deduction
- Individuals can no longer claim personal or dependency exemptions
Fox Business reports that the new form shouldn’t be too complicated for employees with simple financial situations. For individuals with side gigs, multiple jobs and filing status changes, a quick review by their tax pro may be recommended.
Every Taxpayer Should Know This
Employees don’t have to fill a new W-4 out if they have a previous year on file. Unless an employee switches jobs or there is a significant lifestyle change, like marriage or the birth of a child, employers will continue to draw data from the original W-4 they have on file.
Some takeaways:
- Employees should increase withholding only if they have more than one job, their spouse has a job or they have multiple income sources not subject to withholding.
- Employees with children who plan on taking the child tax credit or claim other deductions should decrease withholding and follow instructions on lines 3 and 4b.
The goal of the new W-4 is to save time, be a cross-checking piece for employers and the IRS and reduce any erroneous mistakes.
The new W-4 will have a soft release and be open to taxpayer comments sometime in July of 2019. Accountants and tax pros will be able to review the format and make the changes in their software programs. A successful transition toward better accuracy helps every tax filer.
~Here’s to Your Financial Health!
