How Does the W4 Impact Payroll?
In early 2020, the IRS may be releasing a new Form W-4 for employees to fill out. The purpose of the new form is to reduce the amount of work done to receive or pay taxes in April. Currently, the form (attached here), is a draft and is being submitted back and forth for changes. The new W-4 form is more complex and requires employees to provide more information instead of a simply allowances line. This information is meant to help companies calculate a more accurate representation of what needs to be withheld from the paycheck. Employees that have a W-4 on file from the past would not need to complete the new W-4, although it may be a good idea for these employees to adjust their Form W-4 if there are significant life changes.
One issue that CPAs are noticing is that while withholdings would be calculated once, and would be easy for employees getting paid a set rate each time, they would however be much more complicated for employees with commissions, bonuses, stock plans, etc. More complicated forms also means it is easier for an employee to make a costly mistake without realizing it.
The public was able to comment on the draft until July 1, 2019 where the IRS then started taking those comments and implementing them into the form. The great part is that the IRS and Treasury Department is willing to work with tax community over the summer to develop the improved form for use in 2020.
In April each year, everyone would still file taxes, but would potentially be penalized in the event that you have taxes owed and overpayment would result in a tax refund.
HR Ledger can help.
We will keep you updated about the changes and if you are using our payroll, we can help you offer the new W-4.
This is already included in your payroll agreement with HR Ledger and is no additional cost. Please call Malcolm or Scott today at 800-451-1136.