Coming soon: IRS to improve Form W-4
Determining how much tax an employee wants taken out of a paycheck should become easier next year.
The IRS expects to release the final 2020 Form W-4 Employee Withholding Certificate in the coming months. According to the IRS, the new version will be more accurate, transparent and simplify the tax withholding experience.
“This is a pretty substantial update from the old W-4,” says John Feaman, IPS president. “The IRS re-designed it to be less complicated and complement the Tax Cuts and Job Act (TCJA) that was put into effect January 2018.”
Why do we need a new Form W-4?
While the Form W-4 information didn’t change much, the IRS did away with the complicated worksheets and added easier-to-understand questions to make the withholding process easier for employees.
Why did the withholding allowances go away?
Because the TCJA changed the law, workers can no longer claim personal exemptions or dependency exemptions, so those allowances were eliminated.
Do all workers have to resubmit a new W-4?
Only new employees will fill out the updated form starting in 2020. Current workers can maintain their withholding on their previous W-4, but if they want to adjust their income tax, they will need to fill out a new 2020 Form W-4.
With these forthcoming changes, now is a good time to encourage a “paycheck checkup” for current employees. Remind them to look at their paychecks to ensure they have the correct amount withdrawn for their personal tax profile.