If you have finally familiarized yourself with the Tax Cuts and Jobs Act, with or without the help of a tax attorney, you may be a bit dismayed to learn that another complication is on the way. The Internal Revenue Service is also making changes to paycheck withholdings, and the new W-4 withholding form is quite complex. Below are some important facts about these changes and what to anticipate in the future:
The goal of the IRS is to essentially create a situation in which taxpayers will neither owe or be owed any money after filing their return. Peter Isberg, who heads up government affairs at ADP–a major human resources and payroll company–says that the changes are not going to be simple. Although he stated that filers can anticipate 100 percent accuracy after filling out the new form, they can also expect about a zero on the “ease-of-use” scale.
Complicated Changes on the Horizon
Although the IRS has not released the new form for official use yet, a draft of the document along with instructions were sent to payroll firms and tax preparation companies to get feedback. Many changes are being implemented, some of which concern the claiming of allowances. This is because allowances were traditionally based on exemptions, the latter of which are no longer in play. Instead, the rough draft of the form requires employees to fill in yearly dollar amounts for the following:
- Interest, dividends, and other non-wage income
- Anticipated income tax credits for that tax year
- Itemized and other deductions
- Total yearly taxable wages from lower paying jobs in the filer’s household and for workers who work extra jobs on the side
Isberg stated that the new form looked more like a 1040 form than what most taxpayers are used to seeing on a W-4. The new form is very complicated when compared to the previous W-4 document and concerns were expressed that many workers would have trouble correctly filling it out. Ultimately, the complexity of the new form may result in the need for employers to provide training about the document to workers in advance.
Additional concerns were also expressed about the draft form that involve more than its complexity. For example, privacy issues were cited, as the document requests information about family and spousal income that employees may prefer to keep private. Other workers may not wish to disclose that they have an extra job in addition to their primary employment.
Those with such concerns may opt to use the IRS withholding calculator, but according to the American Payroll Association, the instructions are confusing and the calculator is not easy to use.
According to the IRS, an additional draft version of the new form was available as of May 31st, 2019, and they welcome public comment on the document. All comments will be reviewed and a second draft will be created later in the summer. Plans to implement the new W-4 form in 2019 were scrapped in September, but the IRS plans to roll out the new form for the year 2020. Tax attorneys can offer additional information on this topic or other subjects related to income tax.
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