A new version of the Form W-4 was released by the IRS for 2020.
A lot of people that got refunds in prior years were shocked when they had to pay taxes for the 2018 tax year. There were many changes in the 2017 tax reform act and in an effort to expedite the anticipated tax savings for employees, the IRS reduced the amount of tax withheld from wages. Unfortunately they over-estimated the savings employees ultimately received. This resulted in a lot of people not having enough withheld from their paychecks during 2018. This redesigned form intends to increase transparency and accuracy of the withholding system.
Click here to view the new W-4.
Who is required to furnish a new W-4?
- Anyone hired after January 1, 2020.
- Employees hired prior to 2020 are not required to complete the form unless they are changing their withholdings.
Things you need to know about the new form
- There are no more withholding allowances. On the old form if you claimed more allowances less tax was withheld and if you claimed fewer allowances more tax was withheld. The 2017 tax reform act eliminated personal exemptions and therefore allowances have been removed from the W-4.
- The W-4 is designed to give you the most accurate withholding. If filled out correctly, it would result in a small income tax payment or refund when you file your tax return. If you would like to withhold more to get a larger refund, you can add the additional withholding amount as extra withholding on Line 4c. That will decrease your take home pay each paycheck and either increase your refund or decrease your liability when you file your return.
- Complexity of the new form
- The new W-4 can be very straightforward if you are single and you have a basic tax return (no dependents, claiming the standard deduction, not claiming any tax credits and don’t have any non-employment income). All you do is provide your personal information and sign and date the form
- If your taxes are complicated it will likely take longer to complete the new W-4 than it took to fill out the old one. You will need to know your spouse’s income, tax credit info, and deductions you expect to claim. You might need to take the form home and even call your accountant to get the information needed for the form.
- IRS has an online tool that can help you fill out the new W-4. To get the most accurate withholding use the IRS Tax Withholding Estimator. To use the tool, you will need your most recent income tax return and most recent pay stubs.
Please contact us with any questions.