Changes are coming to your W-4 in 2020. The IRS announced the new design earlier this month to make the withholding process easier and more transparent. There are four important items to take into account.
New Withholding Allowance System
Previously, your W-4 form asked you to identify the number of allowances you were claiming—for you, your spouse, and each dependent. The updated form coming in 2020 eliminates that system and asks you to provide estimates for income, deductions, and credits. Your new W-4 includes a worksheet to assist homes with more than one income to calculate the amount to withhold.
More Accurate Paycheck Withholdings
With changes to tax laws over the last few years, the new W-4 is designed to help you more accurately estimate your tax liability beginning in 2020. A properly prepared W-4 form will help your payroll processor calculate tax withholdings in a more precise way each pay period. A little work on the front-end by you will save you time over the long-term.
Changes Begin in January
A new W-4 form is not required for 2020 if you do not plan to change your withholdings. However, any alterations to your withholdings beginning in the new year must be done using the new W-4 form.
Planning Ahead is Important
Only those with the most straightforward tax filings will not be affected by the new W-4 form. Otherwise, we recommend providing a new W-4 form to update your tax forecast for 2020 and beyond. Accounting for income, deductions, credits, and other changes to your financial outlook will provide you a complete and accurate overview of your tax situation. Starting the planning process for 2020 today will help you start 2020 on the right foot.
Schedule a free consultation with the team of experts at Counting House Associates to learn more about the new W-4 and other changes coming in 2020.