Unless you’ve filed for an extension, you now know the impact of the new tax changes on your individual income taxes. Whether positive or negative, many people are noticing that their tax withholding was either too high or not high enough.
To combat this, the IRS is planning to unveil a new version of the W-4 in 2020 that will help tax withholdings become more accurate, but it may be more difficult to fill out.
The current version of the W-4 form is based around deductions, many of which no longer exist as a result of the Tax Cuts and Jobs Act. While we haven’t seen a copy of the form, reports suggest that in order to line up more closely with current tax legislation, workers may need the following information in order to complete the new form:
- Nonwage income – like dividends and interest
- Itemized and other deductions
- Income tax credits expected for the upcoming year
- For those with multiple jobs – total annual taxable wages for all lower-paying jobs in household
It’s possible that even more information will be needed to complete the form. In fact, the initial draft that was sent out to a few organizations for feedback was so complex, there is concern that employers will need to offer training and support to their employees before they fill out the form.
Beyond complexity, there are also privacy concerns, as some of the proposed information on the new W-4 is related to non-employee spousal income that couples may not wish to share.
Based on the feedback, the IRS will likely make adjustments and come out with another draft for comment sometime in May of this year. In the meantime, if you found yourself in the situation where you withheld too much or too little from your paycheck in 2018, consider using the IRS’s Withholding Calculator to see if you should adjust for 2019. Remember, the less money withheld for taxes, the more money that is available to invest towards your goals!
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.