In lieu of recent criticisms concerning the complexity of form W-4, aka an Employee’s Withholding Allowance Certificate, the IRS released a modified version in draft form at the end of May 2019. After being open to public comment, they intend to release an updated draft around the third quarter.
The W-4 has often been criticized as being too convoluted and bogged down with unnecessary information that taxpayers may find too personally intrusive. Items such as non-wage income, tax credits, total compensation from side-jobs, and other deductions are currently included in the attached worksheets to the W-4.
Part of the IRS’ decision to simplify their form stems from changes to the Tax Cut and Jobs Act, which took effect in 2018. This increased the standard deduction, removed personal exemptions, increased child tax credit, and changed tax rates and brackets.
Since this completely removes exemptions, many taxpayers will feel a shift in the size of their returns if they elected to have a higher percentage withheld throughout the year.
You can view an official version of the May 30th draft here.
According to the IRS, the average American’s tax return for 2018 year was $2,725, compared to $2,771 from last year. Total refunds processed decreased more than $14 Billion, in part, due to the new Tax Cuts and Jobs Act.
Because of this, the IRS wants to encourage taxpayers to better understand their elected withholdings and increase their knowledge around regular paycheck deductions. They encourage everyone to utilize both this form and the official IRS online withholding allowance calculator to help balance their returns come tax time.
To summarize, the new proposed changes to the 2020 W-4 include:
- A simpler layout
- Disclosure of multiple job incomes
- The chance to claim child tax credits
- A shorter section on withholding adjustments and other deductions (aside from standard deductions)
- Space for additional tax withholdings
- No more allowances worksheet
- No more Two-Earners/Multiple Jobs Worksheet
- No more personal exemptions
2019 W-4 Form |
2020 W-4 Form Draft |
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This new W-4 form is set to release in time for the 2020 tax-filing season. Any new employees that start after January 1, 2020, will need to fill out the new W-4 to adjust their tax withholding accordingly.
Stay tuned for more information on new tax information from the AccessPoint HR team!
Have questions? We can help.
If you are having trouble navigating these or other new changes to tax law and proceedings as they pertain to your business, don’t hesitate to contact our team of HR experts. Relieve the burden of tax season with a dedicated HR team by your side; schedule your free consultation and get started today.
Disclaimer: Our firm provides the information in this blog for general guidance only and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.