A brief overview of the Form W-4 Draft
The Internal Revenue Service (IRS) released a new draft of the 2020 Form W-4, Employee’s Withholding Allowance Certificate. The federal income withholding form draft includes instructions and a worksheet.
What’s in the Form W-4 Draft
The IRS’s form draft, released on May 30th, would prohibit employees from claiming withholding allowances when filling out Form W-4. According to the IRS, the form and federal withholding methods were revised as a result of the implementation of the Tax Cuts and Jobs Act (TJCA), which prevents the use of personal allowances in calculating individual tax obligations.
The 5 Steps of the Form W-4 Draft
The form is broken down into five steps (applicability varies person to person):
- Personal information;
- Account for multiple jobs;
- Claim dependents;
- Other adjustments; and
The form is filed with employers to determine income tax withholdings in a pay period and was initially coupled with the amount of personal exemptions. As this contradicted the new tax code, the IRS adjusted the form to meet tax liability requirements under the TCJA.
The IRS attempted to rework the form and its instructions in June 2018 but received feedback that uncovered issues the change would have on withholding methods.
What’s Next for the Form W-4 Draft
Currently, the IRS is asking for comments on the form. A draft of employer instructions on Form W-4 is likely to be released soon, as well. As the IRS also anticipates issuing a second draft of the form later this summer, we will continue to monitor the draft as it moves toward its final state. Please contact your Sikich representative for more information.