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Your W-4 is changing – here’s what you need to know

The Treasury Department and the IRS have released a  redesigned Form W-4 for tax year 2020, making a number of changes to earlier draft versions of the form.

 

The redesigned Form W-4 employs a building block approach to replace complex worksheets with more straightforward questions that make it simpler for employees to figure a more accurate withholding. While it uses the same underlying information as the old design, the new form uses a more personalized, step-by-step approach to better accommodate individual taxpayer needs.

 

Employees who have submitted a 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.

 

The Treasury and the IRS have released the draft improved Form W-4 early to give employers and payroll processors extra time to learn about the new form and update their systems for next year.

 

Several accounting and tax professional groups had complained that earlier draft versions of the form required taxpayers to reveal too much information to their employers about outside sources of income for employees and their spouses. The Treasury and the IRS redesigned the W-4 withholding form in the wake of the Tax Cuts and Jobs Act, which eliminated the traditional exemptions for dependents and the taxpayers themselves along with a host of deductions. Many taxpayers discovered this year as a result of the changes that they unexpectedly ended up owing taxes because they didn’t have enough money withheld from their paychecks last year.

 

The IRS urged taxpayers to do a “paycheck checkup” last year using an online withholding calculator, but the process was complicated and relatively few taxpayers did it.

 

The IRS has also unveiled an improved Tax Withholding Estimator tool to aid in the process.

 

Have questions about these changes? Contact your Whalen advisor for assistance.

 

 

HELPFUL IRS LINKS: FAQs on the 2020 W-4 

Draft W-4 Form

 

 

SOURCES:

Accounting Today

IRS.gov

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