Last year, in line with the new tax law changes, the IRS provided new withholding tables that dictated how much tax was to be held back from employees’ paychecks. It looks like the IRS is planning to continue to make changes to Form W-4 (a.k.a. the Employee’s Withholding Allowance Certificate) for the 2020 tax year.
The W-4 is the form that lets each employee decide how many withholding allowances he or she will claim. The more allowances one claims, the less money is taken from the paycheck throughout the year. Conversely, less allowances mean more money is taken from the paycheck.
Traditionally, the form has focused on a certain amount of allowances based on exemptions. In the latest drafts of the new W-4, these exemptions have been eliminated. Instead, filers will need to fill in dollar amounts for things such as itemized deductions, tax credits, interest and dividend income and total household income.
If this sounds like filling out your W-4 is about to become more complicated, you’d be right. On the bright side, asking for more information is expected to lead to a more accurate amount of withholding for each taxpayer. The goal is to get each taxpayer as close to breaking even as possible when their tax return is filed.
If you’re curious to see what the new W-4 may look like, the IRS plans to release a new draft version on May 31 (and is accepting comments from taxpayers!). A final version is planned to be released by the end of 2019, just in time for the 2020 tax year.
Once the IRS rolls out the updated W-4 and the time comes for you to fill it out, your Somerset advisor will be ready to guide you through any questions you may have. Feel free to reach out to us for help with your W-4, or any other tax related questions.