Employers | Nesteggg Accounting

IRS, Treasury unveil proposed W-4 design for 2020

WASHINGTON –Today the Internal Revenue Service issued a draft of the 2020 Form W-4, Employee’s Withholding Allowance Certificate (PDF), that will make accurate withholding easier for employees starting next year.

The revised form implements changes made following the 2017 Tax Cuts and Jobs Act, which made major revisions affecting taxpayer withholding. The redesigned Form W-4 no longer uses the concept of withholding allowances, which was previously tied to the amount of the personal exemption. Due to changes in the law, personal exemptions are currently not a central feature of the tax code.

“The new draft Form W-4 reflects important feedback from the payroll community and others in the tax community,” said IRS Commissioner Chuck Rettig. “The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors.”

The IRS and Treasury collected extensive feedback over the past year while working closely with the payroll and tax community to develop a redesign that best serves taxpayers.

The IRS expects to release a near-final draft of the 2020 Form W-4 in mid-to-late July to give employers and payroll processors the tools they need to update systems before the final version of the form is released in November. To make additional improvements to this initial draft for 2020, the IRS is now accepting comments for 30 days. To facilitate review of this form, IRS is also releasing FAQs about the new design.

The IRS anticipates the related instructions for employers will be released in the next few weeks for comment as well.

The IRS reminds taxpayers that this draft Form W-4 is not for current use, but is a draft of the form to be used starting in 2020. Employees who have submitted a Form W-4 in any year before 2020 will not be required to submit a new form merely because of the redesign. Employers can continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.

For 2019, taxpayers should continue using the current Form W-4 (PDF). The IRS also continues to encourage people to do a Paycheck Checkup as soon as possible to see if they are withholding the right amount of tax from their paychecks, particularly if they had too much or too little tax withheld when they filed their 2018 taxes earlier this year. People with major life changes, such as a marriage or a new child, should also check their withholding.

The IRS cannot respond individually to those who submit comments, but the agency does appreciate the feedback and will consider all comments received.

Proposed Layout: https://www.irs.gov/pub/irs-dft/fw4–dft.pdf

Publications help business owners and employees learn more about tax reform

Publications help business owners and employees learn more about tax reform

The IRS encourages businesses owners to view recently issued publications on tax reform and to share them with their employees. Some publications give an overview of tax law changes and others focus on paycheck withholding and the tax credit for paid family and medical leave.

Pub 5307, Tax Reform Basics for Individuals and Families
Pub 5318, Tax Reform What’s New for Your Business
Pub 5330, Reminder from the IRS and the American Payroll Association
Pub 5327, New tax credit for employers who provide paid family and medical leave
Pub 5327SP, Nuevo crédito tributario para los empleadores que proporcionan licencia familiar y médica pagada

Seasonal, Part-year Workers Urged to Check Tax Withholding Amount

Seasonal, Part-year Workers Urged to Check Tax Withholding Amount

The Internal Revenue Service today encouraged taxpayers who work seasonal jobs or are employed part of the year to visit the Withholding Calculator and perform a “paycheck checkup.”

The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, eliminating personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets. These changes do not affect 2017 tax returns due earlier this year, but they will affect 2018 tax returns filed next year.

Any changes that a part-year employee makes to their withholding can affect each paycheck in a larger way than employees who work year-round.

The Withholding Calculator, a special tool on IRS.gov, can help taxpayers with part-year employment estimate their income, credits, adjustments and deductions more accurately and check if they have the right amount of tax withheld for their financial situation.

The calculator asks about the dates of a taxpayer’s employment and accounts for a part-year employee’s shorter employment rather than assuming that their weekly tax withholding amount would be applied to a full year. The calculator makes recommendations for part-year employees accordingly. If a taxpayer has more than one part-year job, the Withholding Calculator can account for this as well. In contrast, the Form W-4 worksheets do not distinguish between part-year jobs and full-year jobs.

Using the Withholding Calculator

Taxpayers should have a completed 2017 tax return available when using the Withholding Calculator to help determine their proper withholding for 2018 and avoid issues when they file their returns in early 2019. Taxpayers also need their most recent paystub before using the Withholding Calculator.

Calculator results depend on the accuracy of information entered. If a taxpayer’s personal circumstances change during the year, they should return to the calculator to check whether their withholding should be adjusted. For taxpayers who work for only part of the year, it’s best to do a “paycheck checkup” early in their employment period so their tax withholding is most accurate from the start.

The Withholding Calculator does not request personally-identifiable information, such as name, Social Security number, address or bank account numbers. The IRS does not save or record the information entered on the calculator. As always, taxpayers should watch out for tax scams, especially via email or phone and be especially alert to cybercriminals impersonating the IRS. The IRS does not send emails related to the calculator or the information entered.

Adjusting Withholding

If the calculator results indicate a change in withholding amount, the employee should complete a new Form W-4 and should submit it to their employer as soon as possible. Employees with a change in personal circumstances that reduces the number of withholding allowances should submit a new Form W-4 with corrected withholding allowances to their employer within 10 days of the change.

As a general rule, the fewer withholding allowances an employee enters on the Form W-4, the higher their tax withholding will be. Entering “0” or “1” on line 5 of the W-4 means more tax will be withheld. Entering a bigger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.

The IRS encourages taxpayers to review additional details about withholding by visiting IRS.gov.

New Tax Law affects federal withholding calculations for 2018

Dear Valued Payroll Customer,

The Tax Cuts and Jobs Act made major changes to the tax law. Because of this, you and your employees should do a paycheck checkup using the Withholding Calculator on IRS.gov and, if necessary, complete a new W-4 form. The calculator will help determine the right amount of withholding and can help prevent having too little (or too much) tax withheld.

Recent changes affecting withholding include:

Reduced tax rates
Elimination of personal exemptions
Increased standard deductions: $12,000 for singles, $18,000 for heads of households and $24,000 for married couples filing jointly
Increased child tax credit: $2,000 per qualifying child and a new $500 credit for other qualifying dependents
Changes to itemized deductions

A paycheck checkup is especially important if you or your employees:

Are a two-income family
Have two or more jobs at the same time or who only work part of the year
Claim credits like the child tax credit
Have dependents age 17 or older
Itemized deductions in 2017
Have high income or a complex tax return
Have a large tax refund or tax bill for 2017

For more information, please see IRS.gov/taxreform. For updated withholding tables, please visit the IRS newsroom and the IRS withholding table FAQs.

We hope this information helps you stay in compliance and thank you for being a valued QuickBooks Payroll customer.
Sincerely,

The QuickBooks Payroll Team

Updated Withholding Calculator, Form W-4 Released; Calculator Helps Taxpayers Review Withholding Following New Tax Law

The Internal Revenue Service today released an updated Withholding Calculator on IRS.gov and a new version of Form W-4 to help taxpayers check their 2018 tax withholding following passage of the Tax Cuts and Jobs Act in December.

The IRS urges taxpayers to use these tools to make sure they have the right amount of tax taken out of their paychecks.

“Following the major changes in the tax law, the IRS encourages employees to check their paychecks to help ensure they’re having the right amount of tax withheld for their personal situation,” said Acting IRS Commissioner David Kautter.

The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets.

If changes to withholding should be made, the Withholding Calculator gives employees the information they need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate. Employees will submit the completed W-4 to their employer.

“Withholding issues can be complicated, and the calculator is designed to help employees make changes based on their personal financial situation,” Kautter said. “Taking a few minutes can help taxpayers ensure they don’t have too little – or too much – withheld from their paycheck.”

The withholding changes do not affect 2017 tax returns due this April. However, having a completed 2017 tax return can help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018 and avoid issues when they file next year.

Steps to Help Taxpayers: Do a “Paycheck Checkup”

The IRS encourages employees to use the Withholding Calculator to perform a quick “paycheck checkup.” An employee checking their withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time in 2019. It can also prevent employees from having too much tax withheld; with the average refund topping $2,800, some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks.

The Withholding Calculator can be used by taxpayers who want to update their withholding in response to the new law or who start a new job or have other changes in their personal circumstances in 2018.

As a first step to reflect the tax law changes, the IRS released new withholding tables in January. These tables were designed to produce the correct amount of tax withholding — avoiding under- and over-withholding of tax — for those with simple tax situations. This means that people with simple situations might not need to make any changes. Simple situations include singles and married couples with only one job, who have no dependents, and who have not claimed itemized deductions, adjustments to income or tax credits.

People with more complicated financial situations might need to revise their W-4. With the new tax law changes, it’s especially important for these people to use the Withholding Calculator on IRS.gov to make sure they have the right amount of withholding.

Among the groups who should check their withholding are:

Two-income families.
People with two or more jobs at the same time or who only work for part of the year.
People with children who claim credits such as the Child Tax Credit.
People who itemized deductions in 2017.
People with high incomes and more complex tax returns.

Taxpayers with more complex situations might need to use Publication 505, Tax Withholding and Estimated Tax, expected to be available on IRS.gov in early spring, instead of the Withholding Calculator. This includes those who owe self-employment tax, the alternative minimum tax, or tax on unearned income from dependents, and people who have capital gains and dividends.

Plan Ahead: Tips for Using the Withholding Calculator

The Withholding Calculator asks taxpayers to estimate their 2018 income and other items that affect their taxes, including the number of children claimed for the Child Tax Credit, Earned Income Tax Credit and other items.

Take a few minutes and plan ahead to make using the calculator on IRS.gov as easy as possible. Here are some tips:

Gather your most recent pay stub from work. Check to make sure it reflects the amount of Federal income tax that you have had withheld so far in 2018.
Have a completed copy of your 2017 (or possibly 2016) tax return handy. Information on that return can help you estimate income and other items for 2018. However, note that the new tax law made significant changes to itemized deductions.
Keep in mind the Withholding Calculator results are only as accurate as the information entered. If your circumstances change during the year, come back to the calculator to make sure your withholding is still correct.
The Withholding Calculator does not request personally-identifiable information such as name, Social Security number, address or bank account numbers. The IRS does not save or record the information entered on the calculator. As always, watch out for tax scams, especially via email or phone calls and be especially alert to cybercriminals impersonating the IRS. The IRS does not send emails related to the calculator or the information entered.
Use the results from the Withholding Calculator to determine if you should complete a new Form W-4 and, if so, what information to put on a new Form W-4. There is no need to complete the worksheets that accompany Form W-4 if the calculator is used.
As a general rule, the fewer withholding allowances you enter on the Form W-4 the higher your tax withholding will be. Entering “0” or “1” on line 5 of the W-4 means more tax will be withheld. Entering a bigger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.
If you complete a new Form W-4, you should submit it to your employer as soon as possible. With withholding occurring throughout the year, it’s better to take this step early on.

More information

This spring and throughout the year, the IRS will be working closely with businesses as well as the tax and payroll communities to help educate the public about the new withholding guidelines and the Withholding Calculator.

For 2019, the IRS plans to make further changes involving withholding. The agency will work with businesses and the tax and payroll communities to explain and implement these additional changes.

IRS, Treasury unveil proposed W-4 design for 2020

Publications help business owners and employees learn more about tax reform

Seasonal, Part-year Workers Urged to Check Tax Withholding Amount

New Tax Law affects federal withholding calculations for 2018

Updated Withholding Calculator, Form W-4 Released; Calculator Helps Taxpayers Review Withholding Following New Tax Law

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