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IRS Issues Draft 2020 Form W-4

The IRS has issued a draft of its redesign of Form W-4, Employee’s Withholding Allowance Certificate. The revised form implements the changes affecting taxpayer withholding made by the 2017 Tax Cuts and Jobs Act. The IRS has also released FAQs about the redesign.

The redesigned form no longer uses the concept of withholding allowances tied to the personal exemption. Instead, the new form is divided into five steps.

All employees must complete step 1 (where the employee will enter personal information like name and filing status) and step 5 (where the employee will sign the form). Steps 2-4 are optional; however, if they apply, completing these steps will more accurately calculate the employee’s withholding.

Step 2 applies to taxpayers who have more than one job. The old Form W-4 accounted for multiple jobs using detailed instructions and multiple worksheets. The new Form W-4 directs taxpayers to IRS’s online withholding calculator for the most accurate withholding.

Step 3 applies to taxpayers with dependents. This part should be completed for only one job per household. It is recommended that the taxpayer with the highest paid job claim these deductions for best accuracy.

Step 4 applies to taxpayers who have non-wage income, itemized deductions, want additional amounts withheld or are claiming an exemption from withholding.

The IRS also recommends its withholding calculator for taxpayers with more complex tax situations, like those taxpayers who want to adjust their withholding to account for self-employment income. Beginning in 2020, all employers must use the new form for recently hired employees, while all other employees must use the new form if they wish to adjust their withholding. If an old employee does not submit a new Form W-4, employers must continue to withhold based on the W-4 previously submitted.

The new form is just a draft. The IRS expects to release another near-final draft of the 2020 Form W-4 in mid- to-late July. The final version will be released in November. For 2019, taxpayers should continue using the current form W-4. The new form will not be available for use until 2020. However, taxpayers are encouraged to use IRS’s Paycheck Checkup to determine if the proper amount is being withheld from their paychecks and to adjust their withholding appropriately. Also, taxpayers with major life changes, such as marriage or a new child, should use Paycheck Checkup to check their withholding.

For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).

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