GOAL TO IMPROVE ACCURACY
The IRS recently released a revised draft of Form W-4 for the 2020filing season. The changes are aimed at improving the accuracy of amounts withheld from employees’ paychecks so that there are fewer surprises when employees file their tax returns next Spring.
UNEXPECTED TAX FILING RESULTS
Given all the changes implemented by the Tax Cuts and Jobs Act(TCJA), many taxpayers were surprised this past filing season their refunds were larger or smaller than they anticipated, with the someowing tax they were not prepared to pay.
Although not required, the IRS is encouraging “paycheck checkups” for taxpayers, to ensure the correct amount of tax is being withheld from their paychecks for the remainder of 2019 and going forward.
EXAMPLE OF CHANGES
One of the changes allows taxpayers with multiple jobs or dual MFJincome in the household to check a single box for their amount of withholding. With this option, taxpayers should generally have enough withheld (possibly more than necessary).
NEW METHODS FOR CALCULATING WITHHOLDING
Beginning in 2020 and coinciding with the new Form W-4, three new methods will be available to calculate how much to withhold based on the employee’s wages and Form W-4:
(1)Employer Steps to Figure Federal Income Tax WithholdingProvides five steps for the new computation
(2)Percentage Method Tables for Federal Income Tax WithholdingProvides percentage method tables
(3)Wage Bracket Tables for Federal Income Tax WithholdingRequires the employer to locate the proper tables for the payroll period
UPDATE PAYROLL W-4’s IN FALL 2019
Taxpayers and employers alike will want to review these changes and look to update payroll W-4’s in the fall of 2019 when the final release is expected to be available.
If you have any questions, please contact a member of your BKMSHengagement team and we will be happy to discuss this topic withyou in more detail.