On May 31, the IRS released a draft of its new proposed Form W-4. The IRS drafted the new Form W-4 to enable the Form W-4 to align with the Tax Cuts and Jobs Act of 2017 (“TCJA”). The current Form W-4 enables employees to inform their employers about exemptions that the employees are entitled to claim on their income tax returns. Employers use employees’ claims for exemptions as a central tool to estimate employees’ correct tax withholdings. Under the TCJA, exemptions have been suspended.
The new Form W-4 eliminates exemptions. Rather, it enables employees to report the following items to their employers for the purpose of calculating their withholding:
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- Other income that they expect during that year that might not be subject to withholding; and
- Itemized deductions.
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Employees who have the current W-4 on file as of the end of 2019, do not need to file an updated W-4. However, employees who are hired after the effective date of the new Form W-4 will be required to file the new form. Further, employees who filed an old W-4 can have the option to update their W-4 to more accurately reflect their correct withholding.
Employment tax collection enforcement is currently an IRS priority. The IRS is subjecting employment tax collection to a higher level of scrutiny. Consequently, employers should take measures to ensure that their payroll system will be able to accommodate the new Form W-4.
For further information regarding employment tax and other tax matters, please contact: Michele Weiss at mweiss@hsdtaxlaw.com; 310-550-6200; https://www.hsdtaxlaw.com/attorneys/michele-f-l-weiss
