Brace yourself: the IRS is making changes to the W-4.
Employers will be required to comply by Jan. 1, 2020. And the IRS has said that no grace period will be provided.
The W-4 controls the amount of tax withheld from employee paychecks, and it’s never been particularly user-friendly.
Initial changes, proposed in the summer of 2018, didn’t appear to make things much easier.
Reviewers of that draft, including payroll companies and tax preparation specialists, were concerned that employers would need to offer training prior to giving the form to employees.
An IRS Withholding Calculator was similarly deemed unusable by the American Payroll Association.
Given that feedback, plans for 2019 were scrapped. The IRS is now aiming for a 2020 roll out, with the new design suspected to be available in November 2019.
The overall goal, says the IRS, is for taxpayers not to owe or be owed anything come tax time. To that end, exemptions have been eliminated. Instead of claiming a certain number of allowances, workers will now provide:
- Nonwage income (interest and dividends)
- Itemized and other deductions
- Anticipated income tax credits for the tax year
- Total annual taxable wages for all lower paying jobs in the household
Chances are, adjusting withholding will require specific financial amounts to be disclosed. Users will need to calculate the extra amount they want withheld from each pay period, taking spousal and investment income into consideration, as well as capital gains and more.
A second draft, released in August this year, is expected to be used to program payroll systems now.
But there are still widespread concerns.
The changes to the W-4 – while intended to streamline processes – could potentially prove burdensome for employers; particularly small businesses without their own payroll division. Many employees’ earnings change from pay period to pay period – making new calculations required each pay period.
Additionally, the IRS has said employees who submitted a W-4 in any year prior will not be required to submit a new version due to the redesign.
This could ultimately require employers to maintain two different payroll systems. Some protestors believe the new form could lead to employers misclassifying employees as independent contractors, simply to avoid the hassle.
Experts also say new federal forms always present the opportunity for fraudsters and scammers to imitate employers or tax officials and call or email employees seeking personal information.
Are you already attempting to balance a heavy workload while preparing for the oncoming changes the new W-4 will produce? Maslow Media Group can help.
We specialize in navigating the numerous administrative, legal, and tax-related compliance issues associated with Payroll in any industry, anywhere in the U.S. Let us serve as your company’s employer of record for tax purposes. We can handle all expenses, insurance, and compliance employment law, while putting time back into your schedule.
Contact us today to set up a consultation or call us at 202-965-1100.