IRS To Release New W-4: What To Expect
Many Americans have finished filing their taxes for 2018, but some more changes are coming in the near-term that will affect taxpayers next year.
The IRS is expected to release a new W-4 form for use in 2020. According to an IRS source, the agency held a payroll call on May 2 where it reiterated plans to have that draft available for comment by May 31.
The purpose of the new form is to make withholding more accurate, in coordination with the Tax Cuts and Jobs Act reforms. The ultimate goal of proper withholding is to pay so much each month that you neither owe, nor are owed, come April.
The changes are likely to be substantial, since exemptions were eliminated under the law. A draft released last summer for public comment was criticized for being too complicated and for asking taxpayers to reveal too much personal information.
“It had changed completely and it really asked for personal information that people didn’t want to reveal,” Jennifer Bobe, a senior manager at Margolin, Winer & Evens LLP, told FOX Business.
The American Institute of CPAs, for example, urged the IRS to simplify the “unduly complicated” form, which asked for items like nonwage income, itemized and other deductions, tax credits, and total pay of all lower paying jobs – personal information people may not want given to employers.
“Filling out the draft version of the form would essentially require people to calculate their tax liability,” the American Institute of CPAs said.
Bobe agreed that it was more complex for people to figure out, and “more akin to filling out a tax return.” The draft the IRS puts out in May will be subject to a public comment period and, following last year’s criticism, Bobe believes the IRS will simplify the forms.
“I think they understand they have to change it up,” Bobe said. “My hope is that it will be more simplified.”
Another draft version is expected later this summer, which will likely be close to what is ultimately used in 2020. In the meantime, it is important to check and update your withholding amounts if your end-of-year tax refund, or liability, was not what you expected. Your current W-4 will be used until the new one is put on file – meaning any surprises could be exacerbated next April.
Many people did not check their withholding amounts leading into this tax season, despite the government’s advice to do so. People received little, or no refunds, despite having a similar financial situation to the year prior. Some even owed the tax agency for the first time.
Bobe recommends that taxpayers look at their return from last year and asses what is going to happen throughout 2019.
“At the end of the day you want to make sure you’re withholding enough so you’re not penalized,” Bobe said. “I think that’s the biggest key.”
The IRS has a withholding calculator that can help.
Click here to view the FoxBusiness video ‘Tax Refund Sticker Shock‘. Aneta Markowska of Cornerstone Macro discusses why the IRS may be receiving fewer tax returns this year.
Source: FoxBusiness
