IRS Draft of 2020 Form W-4 – What You Need to Know September 18, 2019

Because of withholding problems in 2018, the IRS proposed a massive change to the 2019 Form W-4. The early draft of the 2019 Form W-4 had 11 pages of instructions. The expansive instructions resulted in a “projected 1040.”

Draft of 2020 Form W-4

While this method may have resulted in more accurate withholding, gathering the information and completing the calculation would have been burdensome for many taxpayers, and impossible for some. It also would have provided the employer with more income information than many employees wanted to give. After many complaints and criticisms, the IRS withdrew its 2019 draft and replaced it with a W-4 that looked like the 2018.

Something different is in the works for the 2020 Form W-4. 

First, the 11 pages of instructions have been replaced with two pages, which include a multiple job worksheet and a deductions worksheet.

The Form W-4 itself is on one page and is in steps that are intended to make the form more understandable to the employee. A link to the draft of the form and instructions is here.

In coordination with the release of the draft 2020 Form W-4, the IRS also released a new Tax Withholding Estimator. According to the IRS, “The new Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals, and other taxpayers, a more user-friendly step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.”

TAX PRACTITIONER NOTE:

The instructions for the Tax Withholding Estimator include, as IMPORTANT (in caps and bold,) a warning that “people with more complex tax situations should use the instructions in Publication 505.” Maybe, just maybe, the IRS could have said–see your tax professional for help.

WHY DO WE CARE?

First, our business clients will want to hear from us about the changes so they can alert their HR department. Employees may have questions and the business should advise on how HR responds.
Second, our individual clients that complete their own W-4 (think engineer) will want to know that the form has changed. 
And, finally, (and as always,) we can pass on this information to our clients and assure them that we are here to help.

Because of withholding problems in 2018, the IRS proposed a massive change to the 2019 Form W-4. The early draft of the 2019 Form W-4 had 11 pages of instructions. The expansive instructions resulted in a “projected 1040.”

Draft of 2020 Form W-4

While this method may have resulted in more accurate withholding, gathering the information and completing the calculation would have been burdensome for many taxpayers, and impossible for some. It also would have provided the employer with more income information than many employees wanted to give. After many complaints and criticisms, the IRS withdrew its 2019 draft and replaced it with a W-4 that looked like the 2018.

Something different is in the works for the 2020 Form W-4. 

First, the 11 pages of instructions have been replaced with two pages, which include a multiple job worksheet and a deductions worksheet.

The Form W-4 itself is on one page and is in steps that are intended to make the form more understandable to the employee. A link to the draft of the form and instructions is here.

In coordination with the release of the draft 2020 Form W-4, the IRS also released a new Tax Withholding Estimator. According to the IRS, “The new Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals, and other taxpayers, a more user-friendly step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.”

TAX PRACTITIONER NOTE:

The instructions for the Tax Withholding Estimator include, as IMPORTANT (in caps and bold,) a warning that “people with more complex tax situations should use the instructions in Publication 505.” Maybe, just maybe, the IRS could have said–see your tax professional for help.

WHY DO WE CARE?

First, our business clients will want to hear from us about the changes so they can alert their HR department. Employees may have questions and the business should advise on how HR responds.
Second, our individual clients that complete their own W-4 (think engineer) will want to know that the form has changed. 
And, finally, (and as always,) we can pass on this information to our clients and assure them that we are here to help.