IRS is Developing a New W-4 for Tax Withholding

The Treasury Department and the IRS are working to incorporate changes into the Form W-4, Employee’s Withholding Allowance Certificate, for 2020. The current 2019 version of the Form W-4  is similar to last year’s 2018 version.

The IRS is working closely with the payroll and the tax community as it makes additional changes to the Form W-4 for use in 2020.

For the current 2019 tax year, the IRS continues to strongly urge taxpayers to review their tax withholding situation as soon as possible to avoid having too little or too much withheld from their paychecks. To perform a quick “paycheck checkup” use the IRS withholding calculator.

Here is a draft of what the new form would look like.

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The IRS is seeking comments from the public about this draft of Form W-4. If you have comments about this draft of Form W-4, you can submit them to [email protected]. Comments should be submitted by July 1, 2019 to be considered timely.

What is a W-4?

Form W-4 is required so that your employer can withhold the correct federal income tax from your pay. Typically an employee will fill one out when he begins employment.

You should complete a new Form W-4 also when your personal or financial situation changes.

Why redesign Form W-4?

The new design reduces the form’s complexity and increases the transparency and accuracy of the withholding system.

While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.

What happened to withholding allowances?

Allowances are no longer used for the redesigned Form W-4 to increase transparency, simplicity, and accuracy. In the past, the value of a withholding allowance was tied to the amount of the personal exemption. Due to changes in law, currently you cannot claim personal exemptions or dependency exemptions.

Are all employees required to submit a new Form W-4?

No.  Employees who have submitted Form W-4 in any year before 2020 are not required to submit a new form merely because of the redesign. Employers will continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.

When should I increase my withholding?

You should increase your withholding if:

  1. you hold more than one job at a time or you and your spouse both have jobs (Step 2) or
  2. you have income from sources other than jobs that is not subject to withholding (line 4a).

If you do not make these adjustments, you will likely owe additional tax when filing your tax return, and you may owe interest and penalties.  With regard to income from other sources, you can pay estimated tax instead of having extra withholding.

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