The IRS released a new draft of its W-4 form last week, and while the form isn’t expected to be made available before 2020, there are steps taxpayers should take now to eliminate potential problems come next filing season.
W-4 forms are filed with employers to calculate how much of your paycheck should be withheld for federal taxes.
While experts told FOX Business that the forms shouldn’t pose too much trouble for taxpayers with simple financial situations, Ed Slott, tax expert and founder of Ed Slott and Co., told FOX Business that when people are hit with a ton of paperwork when they start a new job, the potential for error increases. Unlike the current forms, taxpayers also may need to refer to their prior year’s returns in order to fill it in accurately.
Pete Isberg, vice president of government relations for payroll processing firm ADP, noted employers may even have workers take the form home to fill out.
It should be noted that people with W-4 forms on file will not have to fill out a new one even when it is released in 2020, but they may want to make changes to their situation, nonetheless.
This year, many taxpayers were surprised by the size of their refunds, even when their personal financial situation had not changed too much. Some people were frustrated that they received less money back, while others even owed the tax agency for the first time.
In order to avoid running into that problem again, Slott said taxpayers should act now to adjust their withholding.
“You have the best facts and figures on your current return now that you know how things will play out,” Slott said.
For people who owed the agency, you need to figure out how much you were short last year and divide that by the number of weeks in the pay period, Slott said. However, it is worth noting that it is five months into the year, so withholding will have remained the same throughout that time.
Accurate withholding suggests you should neither owe, nor receive a refund, from the IRS during tax season. That indicates the proper amounts are being withheld from your paycheck. It is important because you can be penalized for paying too little in taxes throughout the year.
The newly unveiled form is an early draft, the IRS noted, and will be subject to a public comment period which is expected to end at the beginning of July. The form draws taxpayers’ attention to a number of items they should be aware of in order to make their withholding more accurate – including prompting them to identify whether they have multiple jobs, for example.