The Internal Revenue Service (IRS) will release a new and allegedly improved Form W-4 in the near future. The agency states the changes will help better ensure Form W-4 is in line with the 2017 Tax Cuts and Jobs Act (TCJA). The changes could mean complications for employers. To help ease the transition, the agency provided employers with an early view of the form.

It is important to note the 2020 Form W-4, Employer Withholding Allowance Certificate provided by the agency is a draft. A previous draft received criticism and led the agency to make additional changes. the IRS has stated that this is still a draft and that more changes may be made before a copy is finalized.

Why make changes?

The TCJA led to many changes in the tax code. As a result, the IRS requires a new form to properly reflect current law.

What has changed?

The agency has stated it intends to increase transparency and accuracy by using straightforward questions instead of complicated worksheets to determine an employee’s withholding status. Once the agency releases the new form, employees can no longer request adjustments to their withholding through withholding allowances. This is because the new law no longer provides for allowances — the passage of the TCJA essentially removed personal exemptions and dependency exemptions.

Instead, employers will use the new form to “increase or reduce taxes and amounts to increase or decrease the amount of wage income subject to income tax withholding.”

Why the release?

As with the previous Form W-4 draft release, the agency is requesting feedback. Employers with concerns are encouraged to voice these issues to the agency. The agency will then take the comments into consideration and potentially make additional changes before finalizing the form.