New Form W-4 for employee withholding

There’s more excitement – so to speak – in the future for payroll departments, tax preparers, and taxpayers, as the Internal Revenue Service completed yet another restyling of Form W-4, “Employee’s Withholding Allowance Certificate.”

The new form was released in late 2019 and follows a previous release in Dec. 2018. The progression of W-4 changes is driven by the Tax Cuts and Jobs Act of 2017 (TCJA).

Along with lower tax rates, welcomed by many, the TJCA created a certain amount of confusion. The law’s effects as it related to the nuances of the tax system were not then in many – or most cases - well understood. To some degree, it’s still a process in search of the finish line.

Now, additional TCJA experience and two tax years are under the belts of tax preparation and employee payroll communities. Out of this comes the new W-4, a crucial document under any tax law or revision. An early draft of the new W-4 was released in May 2019. A subsequent close-to-final version was issued in August, followed in December by the final form.

Employees choose on the W-4 how much money is withheld from their pay to meet their federal income tax requirements. Each employee should review their W-4 annually to ensure the withholding corresponds to their financial situation. An annual W-4 review is worthwhile even if no pay or financial changes have occurred. It keeps the subject annually at a taxpayer’s top-of-mind.

The IRS offers tools to assist in determining that the correct amount of taxes are withheld. Taxpayers can use the Paycheck Checkup to decide how much or little they want withheld. Employers can use the new Tax Withholding Assistant to determine how much federal tax should be deducted from employees’ pay.

Previously there were two standards for W-4 withholding exemptions: if in 2018 you had no tax liability and were eligible for a refund of all the money withheld from your pay, and if in 2019 (for filing in 2020) the same circumstances existed. The new W-4 version eliminates the exemptions.

As always, the new W-4 form is intended to make withholding simpler and clearer. Whether or not that is the case remains to be seen.


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