Last year, after pushback from taxpayers and tax professionals, the Internal Revenue Service (IRS) promised to revisit form W-4, Employee’s Withholding Allowance Certificate. The IRS issued a statement confirming that “the Treasury Department and the IRS will incorporate important changes into a new version of the Form W-4, Employee’s Withholding Allowance Certificate, for 2020.” Today, the IRS issued a draft of the 2020 Form W-4.
Here’s what the draft form W-4 for 2020 looks like:
You can see a full-sized version on the IRS website here (downloads as a PDF).
The new draft reflects changes under the Tax Cuts and Jobs Act (TCJA). In addition to the new tax rates, the TJCA made significant changes to itemized deductions normally claimed on Schedule A and eliminated personal exemptions. As a result, current withholding schemes were not adequate for all taxpayers, causing the General Accounting Office (GAO) to warn taxpayers that unless they adjusted their withholding, they would owe taxes.
The concern eventually resulted in an announcement from the IRS that penalty relief might be available. In March of 2019, the IRS expanded the relief for those taxpayers making payments of at least 80% of the tax shown on the return for the 2018 taxable year. Despite the penalty relief, concerns about withholding remained. That’s why the form W-4 revisions remained a priority.
The draft form is a little bigger than the old form W-4: it’s a whole page (and yes, there are still additional worksheets). The form includes calculations for taxpayers with more than one job and how to deal with additional income that might not be subject to withholding – items that tax professionals had expressed concern had not been adequately addressed after tax reform.
“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 revised form W-4 will not be effective until 2020. And changes are still on the way: The IRS expects to release a near-final draft of the 2020 Form W-4 in mid-to-late July before the final version of the form is released in November. That means that taxpayers should continue to use the current form W-4 (downloads as a PDF) throughout 2019.
In the meantime, the IRS advises taxpayers to take advantage of the withholding calculator on the IRS website to do a payroll checkup. (You can find the new withholding calculator on the IRS website here.)