What To Know About The New Form W-4
This past tax season gave taxpayers our first feel of the changes that stemmed from the Tax Cuts and Jobs Act (TCJA). However, it’s not over yet. There is more to come … and it won’t be easy.
Later this year, the IRS will change how you adjust your paycheck withholdings with the release of a new W-4 form that will incorporate the TCJA changes so that tax withholdings are more accurate. The ultimate goal is that taxpayers should not owe taxes nor receive a refund.
READ ALSO: Major Form W-4 Revisions Postponed Until 2020
Not An Easy Task
Last summer, the IRS issued a draft version and instructions of the new W-4 to solicit feedback from tax and payroll professionals before releasing the final W-4. Since exemptions were eliminated, the new form doesn’t ask for a certain amount of allowances based on exemptions – but requests workers to input the annual dollar amounts for:
- Expected income tax credits
- Any nonwage income such as dividends and interest
- Itemized and other deductions
For taxpayers with more than one job, the form asks for the total annual taxable wages for all household jobs.
The feedback received from the initial draft indicated that employees will likely have a difficult time correctly completing the new W-4 and employers might need to offer training.
So What Is The Holdup?
There are concerns from the tax and payroll community that go beyond the complexity of the form.
The main issue is that of privacy. Due to the fact that the form requests spousal and family income information, professionals thought employees might not want to share that information with their employers. Some might not want to list that they have another job or do side work.
One way to avoid disclosing this private information is to use the IRS withholding calculator, but feedback indicated it confusing and not easy to use.
Due to these and other issues, the IRS did not implement the new W-4 form for 2019, but they do plan to roll it out for 2020.
What’s In The Cards
We should see another W-4 draft by the end of May. This time, the IRS will seek comment from the public. The IRS will then review this round of comments and plans to post another draft by the end of summer with the final version released by the end of 2019.
There is some information you should have in order to complete the new W-4. In addition to last year’s return, pay stubs and past 1099 forms, it will be important to know:
- Your filing status
- Your number of dependents
- Information about your itemized deductions such as home mortgage interest, state and local taxes, and charitable deductions
- Your earnings from all jobs
- Information about nonwage income such as business income, dividends, and interest
- Your spouse’s income information, if married and applicable
In addition to this new W-4 form, taxpayers may need to complete a new state form. States might release their own forms as most states currently use the W-4 for withholdings. Ohio has an IT-4 form for this purpose.
For now, the IRS urges taxpayers to take a close look at their tax withholdings to avoid paying too much or having too little withheld from their paychecks. You can try using the IRS withholding calculator to perform a quick paycheck checkup. Alternately, you can reach out to your CPA or tax preparer for guidance.
We will keep you updated on the progress of this new W-4 form, and we will be a resource for both taxpayers and businesses when the final form is issued. In the meantime, reach out to us with questions.
By: Dee Gray, CPP (New Philadelphia)