While the IRS will not introduce its new version of the W-4 until next year, some states are moving forward with changes and forms of their own as state and federal taxing agencies scramble to replace withholding forms that may not produce withholding amounts consistent with the 2017 tax overhaul or with state income tax purposes.
A modified federal W-4 Employee Withholding Allowance Certificate will not be available until 2020.
The new federal version is being designed to more accurately reflect changes mandated under the Tax Cuts and Jobs Act of 2017 (TCJA) that include the elimination of the personal exemption and the doubling of the standard deduction.
Earlier Revision Rated "Huh?" By Tax Professionals
Tax professionals did not think much of the agency's earlier attempt to redraft the form. Following criticism from both the National Association of Enrolled Agents and the American Institute of Certified Public Accountants that a prior version of the form was too complicated, likely to produce under-withholding and created privacy risks for employees asked to disclose household income to their employers, the IRS announced that they would have another version of the form for use in 2020.
In the meantime, while the 2019 version of the tax form will not look much different from the 2018 W-4 (according to a statement from the IRS on its website), the IRS released an updated withholding calculator and urged taxpayers to use it to review their tax situation to ensure they were not having too little or too much withheld from their paychecks.
More States Adopt their Own Withholding Forms
At the state level, some states like Oregon – which has its own income tax requirements and used the federal W-4 to calculate withholding – have created a state W-4 because the federal form is no longer consistent with the number of allowances used in calculating state income tax withholding.
The process has generated a fair share of exasperation, not all of it directed at the IRS, which was tasked with trying to administer a complicated new bill that went into effect within weeks of its passage and left many tax professionals scrambling to decipher what had changed.
“To be clear, a law the Congress pushed through at the end of 2017, which was effective beginning in 2018, won’t have clear guidance for taxpayers until 2020,’’ senior contributor Kelly Phillips Erb writes in Forbes. The TCJA is nearly a year old and the “IRS is still trying to figure out how to assist taxpayers with the new law,” she wrote in September.
Get Help Keeping Up With Tax Changes and Challenges
If keeping up with tax changes have you exasperated, give us a call or click on the link below to learn how we can help. At Payroll Tax Management we have deep expertise in helping our clients unravel the tangle around state and federal withholding and payroll taxes. We are a special source of comfort to clients managing the complex payroll processes that come with a multistate workforce. Our clients have access to an array of additional solutions through our sister companies SBS Payroll and Time Rack.