Charles Read, CPA, USTCP, IRSAC

Charles Read, CPA, USTCP, IRSAC
President/CEO GetPayroll
Find me on LinkedIn

 

The IRS Just Redesigned an Important Tax Form to Reflect the Modern Job Market, Americans Must Take Notice. In its first upgrade since 1987, the new W-4 tax form for employees will fundamentally change the way Americans calculate wage withholdings.

Starting January 1, 2020, the Internal Revenue Service’s new W-4 and W-4P tax forms will go into effect. The revision is intended to calculate a more accurate withholding amount to minimize both taxes due and refunds available. This change will affect all taxpayers who begin new employment on or after January 1, 2020, and must complete the revised forms as part of starting employment.

New IRS W-4 Form

The updated form is a result of the Trump Administration’s changes in the Tax Cuts and Jobs Act (TCJA) of 2017, which attempts to better reflect the way Americans earn money in the gig economy by taking into account second and third jobs that provide supplementary income.

“It’s hard to believe that a single update to a common tax form could make such a difference in the way taxpayers understand how and how much they’ll be paying Uncle Sam, but that is precisely what we have on our hands,” says Charles Read, owner of GetPayroll—a 30-year-old national payroll service bureau. A CPA and member of the US Tax Court Practitioners, Read also serves on the IRS Advisory Committee that provided guidance on the form revision and rollout

Key changes include:

1. There are no allowances on the form to elect, as allowances were tied to the personal exemption which along with dependent exemptions are gone under the TCJA.

2. The new form has five steps included to calculate withholdings. Not every taxpayer will need to complete all five, as some may not be applicable.

3. The new form considers items such as other income from side gigs, second jobs or other income sources. While not required to complete and share with your employer, it will provide
the most accurate basis to calculate withholdings.

4. Existing employees are not required to complete a revised W-4 form and existing withholding elections will continue in 2020.

5. The IRS advises taxpayers to use its Tax Withholding Estimator https://www.irs.gov/individuals/tax-withholding-estimator to assess any changes needed.

“Taxpayers should be aware that the most significant change to the new W-4 is the elimination of allowances based on exemptions and the introduction of a five-step process for determining what should be withheld from your paycheck,” says Read. “Think of your new W-4 as a miniature tax return. Completing the form will take a bit longer, but it may also help you more accurately calculate how much the government should retain so you don’t have any surprises or headaches at the end of the year.”

While existing employees are not required to complete a revised W-4, Read recommends taxpayers revisit their withholdings, which will require them to interact with the new W-4 as if they are new employees.

“Wherever you are in your career,” says Read, “this is one of those times to refamiliarize yourself with this particular part of the tax system, especially if you’ve recently joined the wave of Americans who have chosen to forego traditional employment and embrace the gig economy.”

If you are struggling with the new W-4, please contact us with any questions.

Interested in learning more about GetPayroll services? 

Are you shopping for new payroll services? Schedule a demo to see if GetPayroll is right for your business.

If you are a current GetPayroll customer (yay!), take a look at some of our new services that may help streamline your business operations.

[rara_divider color=”#008FD2″ style=”solid” thickness=”2px” width=”100%” mar_top=”5px” mar_bot=”5px”]

 

Comments and Suggestions

Don’t forget to leave us a comment below and tell us what you think. If you have any requests or suggestions, we’d love those too!