The Internal Revenue Service last month issued a draft of the new Form W-4 for 2020, Employee’s Withholding Allowance Certificate, that will make accurate withholding easier for employees starting next year. (An image of the draft is available at the end of this article).
The revised form implements changes made following the 2017 Tax Cuts and Jobs Act, which made major revisions affecting taxpayer withholding.
The redesigned Form W-4 no longer uses the concept of withholding allowances, which was previously tied to the amount of the personal exemption. Due to changes in the law, personal exemptions are currently not a central feature of the tax code.
“The new draft Form W-4 reflects important feedback from the payroll community and others in the tax community,” said IRS Commissioner Chuck Rettig. “The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors.”
The IRS reminds taxpayers that this draft Form W-4 is not for current use, but is a draft of the form to be used starting in 2020. For 2019, taxpayers should continue using the current Form W-4.
The Need for a Paycheck Checkup Every Year
The IRS also continues to encourage people to do a Paycheck Checkup as soon as possible to see if they are withholding the right amount of tax from their paychecks, particularly if they had too much or too little tax withheld when they filed their 2018 taxes earlier this year. People with major life changes, such as a marriage or a new child, should also check their withholding.
- The IRS Withholding Calculator works for most employees by helping them determine whether they need to give their employer a new Form W-4.
- Taxpayers can use their results from the calculator to help fill out the form and adjust their income tax withholding.
- If a taxpayer receives pension income, they can use the results from the calculator to complete a Form W-4P, Withholding Certificate for Pension and Annuity Payments, and give it to their payer.
- Taxpayers who don’t pay taxes through withholding, or don’t pay enough tax that way, may still use the Withholding Calculator to determine if they have to pay estimated tax quarterly during the year to the IRS. Those who are self-employed generally pay tax this way.
When Will the New Form W-4 Be Officially Released?
The IRS expects to release a near-final draft of the 2020 Form W-4 in mid-to-late July to give employers and payroll processors the tools they need to update systems before the final version of the form is released in November. To make additional improvements to this initial draft for 2020, the IRS is now accepting comments for 30 days. To facilitate review of this form, IRS is also releasing FAQs about the new design.
Employees who have submitted a Form W-4 in any year before 2020 will not be required to submit a new form merely because of the redesign. Employers can continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.