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So, here’s a step-by-step guide to filling out Form W-4 in 2022 and 2023, including what it is and who’s required to complete it. The IRS also plans to release the related instructions for employers in the next few weeks. As an independent https://turbo-tax.org/ organization within the IRS, the Taxpayer Advocate Service helps taxpayers resolve problems and recommends changes that will prevent problems. If too little is deducted, you may get a smaller refund, or possibly owe money at tax time.
- For filers, the form is crucial for calculating withholding that wasn’t updated to reflect the new facets of the 2017 tax overhaul.
- Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.
- “The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors,” IRS Commissioner Charles Rettig said.
- Their goal is that it “reduces the form’s complexity and increases transparency and accuracy of the withholding system.”
- Although some employees might be deliberately using the tax system to save, others might not understand the concept of withholding “allowances”—a technical term that may be difficult for laymen to grasp.
But the TCJA eliminated exemptions as a tax calculation tool, requiring a major overhaul of the W-4. People who start new jobs in 2020 are required to complete the new form. If you’re with the same employer as in 2019 or before, though, then they’ll just keep doing what they’re doing — determining your withholding based on your most recent Form W-4.
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It’s also an important tool to use after a life-changing event that may impact your tax filing, such as the birth of a child, marriage or the purchase of a home. Flash forward to 2020 and the Internal Revenue Service (IRS) has released https://turbo-tax.org/irs-overhauls-form-w/ a new W-4 and withholding calculator to help taxpayers remedy their withholding. The new form is simplified to “reduce the form’s complexity and increase the transparency and accuracy of the withholding system,” according to the IRS.
For further information about the 2020 federal W-4 form, view the IRS 2020 W-4 Form FAQs here. Another new line (7) will ask employees to enter the amount of any tax credits for which they expect to qualify; for example, the newly expanded child tax credit. Previously, any tax credits were translated by employees, using a complicated worksheet, into additional withholding allowances. As with additional income, any tax credits should only be entered for the highest paying job in households with multiple incomes.
Why you should care about the new tax form
To know the exact amount, a third party would also need to know the employee’s salary and review the IRS’s withholding tables. Then came the Tax Cuts and Jobs Act (TCJA) of 2017, which changed the way tax liability is calculated, rendering the old W-4 obsolete. A new Form W-4 was released by the IRS in 2020 and its use by employers became mandatory in 2021.
You only need to fill out a W-4 if you started a new job in 2020, but tax specialists encourage workers to review their withholding each year. Now you just have to check a box if you work two jobs or if you have a spouse who works. The new form has been divided into five steps and you can skip questions that don’t apply to your situation. The draft 2020 Form W-4 is not for immediate use, the IRS emphasized, and employers should continue to use the
current Form W-4 for 2019. Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices.
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The IRS’ Tax Withholding Estimator is a useful tool to help an employee determine his or her withholding amount. Having a copy of your most recent pay stub and tax return will help during that process. Tax forms can seem daunting and confusing, so in an effort to simplify the process, the IRS has overhauled the federal income withholding form. It’s not necessary to fill out a new Form W-4 if your financial situation has remained the same.
There is one final step that employers must fill out once they receive a completed form from an employee. The employer should enter the name of their organization and its address, the employee’s first date of employment, and their employer identification number (EIN). Employees who have submitted Form W-4 in any year before 2020 will not need to submit a new form because of the redesign.
