New W-4 Form

To say there were some ticked off folks after-tax returns were filed for 2018 is an understatement. Border-to-border and coast-to-coast people who normally don’t have to send the IRS additional money were first shocked, and then angry that the government was demanding more. People who got a smaller-than-usual refund weren’t happy either.

The tax reform act was passed in 2017. It raised the standard deduction, lowered tax rates and changed the structure of credits and deductions for taxpayers. You got more money in your paycheck, but when you get more the IRS wants more. Unfortunately, the IRS didn’t update the W-4 form to reflect the new changes and lots of folks didn’t have enough withheld from their paychecks in 2018. You were receiving more money based on the new tax law but withholding taxes based on the old schedule.

To stem the tide of future unhappiness the IRS is redesigning the W-4 so employers know how much to withhold from your check based on the new tax law and hopefully prevent surprises going forward. A Treasury Department fact sheet says the new form reduces complexity and increases the transparency and accuracy of the withholding system. Supposedly, “it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.” The new form will ask taxpayers whether members of their household have multiple jobs, ask for dollar amounts for other income not automatically subject to withholding such as freelance work, claim your dependents, and factor in the $2000 child tax credit for each child under 17 or the $500 credit for qualifying dependents. It also has a place to request your employer withhold more taxes than required just to cover your bases.

But this W-4 redesign is in the draft stage. The final version doesn’t take effect until January 1, 2020 so it won’t help you calculate withholding for 2019. The Treasury Department fact sheet recommends increasing your withholding if you have multiple jobs or both spouses are employed. Or it says you can reduce your withholding if you are eligible for tax credits and deductions, such as the child tax credit.

If you were blindsided in 2018, you can still fill out the existing W-4 with your employer and have them withhold more so you’re not surprised when you file your 2019 taxes. But the burden is on your shoulders. Check your withholding. Compare it to last year. Make the appropriate adjustment if necessary.

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