United States, California, Sunnyvale - 08/19/2019 (PRDistribution.com)
With increased accuracy, comes a more complex, confusing document.
2018 brought one of the largest pieces of tax reform legislation in decades. Some of the changes included lower tax rates and changed income tax ranges, increased alternative minimum tax exemptions, tax relief for individuals and families, and eliminations or reductions in deductions.
This latest tax reform that went into effect in 2018 has brought on some changes to W-4 exemption forms for 2019. Experts have said the changes may be a headache for some who have more complicated withholdings. If you own a home, are self-employed, or if you itemize your deductions, you may want to start reviewing your withholdings now before the new forms are out. Tax relief companies like Tax Relief USA can give free consultations and offer tax filing guidance at any time. It is important to get prepped early for next year’s tax filings and make any necessary changes to your W-4 with your employer.
One thing to know is that if you submitted a W-4 at your current job prior to 2019, you are not required to adjust your withholdings with the new form. The old W-4 will still work and the withholdings will continue to be computed based on the information from your most recently submitted form W-4. You can, however, use the new form as a chance to refine your adjustments for 2020.
Any new employees in 2019 will be required to use the redesigned form. So, you may have a mix of old and new forms within your company. This is just fine. The intent of the update is to allow for more transparency, simplicity, and accuracy when it comes to withholdings.
One of the biggest changes to the redesign is that you must account for multiple jobs, and adjust withholdings accordingly. The opportunity to adjust withholdings based on multiple jobs is nothing new, but it’s possible instructions and worksheets for this option were not as clear to employees on the old W-4 forms.
Since only one standard deduction can be claimed on your tax return, it is important to withhold more money from the combined pay from all jobs (whether individually, or from spouses) to avoid owing additional tax, interest, or paying penalties come tax time. Employees may have reservations about sharing information about a second job or side gig, but keep in mind the intention is to get the biggest tax return possible, without having to owe.
Being well-informed about how to withhold the proper amount of taxes, and submit the proper deductions can save you the pain of overpaying, underpaying, or audits. The IRS has answers on their page for some Frequently Asked Questionsregarding the early release of the 2020 Form W-4. Know your stuff, and make sure your employers are on the same page.