Big Changes for the New W-4 Form
By James Paille, Thomson Reuters
The pre-draft 2019 W-4 has been released, and it’s a major change from previous versions of the W-4. The new W-4 doesn’t have a way to number allowances — instead, four new boxes that instruct the taxpayer to predict income and deductions replace the old exemption numbers.
The lines are as follows:
Filing status: Line 3 is used to indicate the employee’s tax filing status. The draft 2019 Form W-4 has checkboxes to indicate that the filer is single or married filing separately, married filing jointly, or head of household. The number of default allowances will be calculated automatically in single tables based on the filing status that is checked — 2 if single or married filing separately, and 3 if married filing jointly or head of household.
Lines 5-8. Lines 5-8 are new and completely optional to the taxpayer. These lines mimic a 1040 filing and the IRS indicates that completing them will provide more accurate withholding information.
- Line 5 is for nonwage income not subject to withholding
- Line 6 is for itemized and other deductions (other than the standard deduction)
- Line 7 is for applicable tax credits
- Line 8 is for the total pay of lower paying jobs and is only used when employees have more than one job or are married filing jointly and both spouses work
Completing these lines requires information that employees may not want to share. To avoid completing all lines individually, the IRS recommends using the IRS Withholding Calculator or IRS Publication 505, Tax Withholding and Estimated Tax.
Also, line 9 has additional withholding per paycheck.
The IRS has two draft instructions for calculating withholding — a short instruction with the 2019 W-4 for simple filers and an 11-page instruction guide for more complicated returns (i.e. stock ownership, dividend, and self-employment income). The IRS has indicated that they will advise employers to make the 11-page W-4 instruction booklet available to all employees.
Note: Several states have not adopted the new TCJA rules — the current list and chart are available at www.cpapracticeadvisor.com/12422991.
Furthermore, many states allow taxpayers to use the federal W-4 for state withholding. It’s expected that this will no longer work for 2019 W-4s and most states (exception: PA) will need to come up with their own state version for withholding. Look for an update on this later in the year.
The federal government will allow taxpayers to continue to use their old W-4 status with no need to file a new W-4 — however, the federal government is suggesting all taxpayers review their withholding and see if they need to file a new 2019 W-4 (when it becomes available) for 2019 wages. All new employees hired as of January 1, 2019, and all employees that want to make W-4 changes after January 1, 2019 will be required to use the 2019 W-4.
A second draft is expected sometime around August 2018 with a final version later this year. We will be watching for updates and potential changes.
James Paille CPP is the Director of Operations for Thomson Reuters myPay Solutions. He has been an executive manager in the payroll service industry for more than 30 years, specializing in managing multi-location offices. Jim is President of the American Payroll Association as well as a member of the National Speakers Bureau and chair of the CPP Certification Review Panel. He holds a Bachelor of Science in Accounting from St. John Fisher College in Rochester, NY.
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