Filling out a withholding form (the W-4) is the first step in paying taxes on income. The IRS recently released a new form it wants to use for withholding that complies with the changes of the Tax Cuts and Jobs Act. The public may comment on the new form through July 1.
When the Tax Cuts and Jobs Act went into effect, it eliminated certain exemptions and deductions that had a significant impact on many taxpayers, including those here in Massachusetts. Since the W-4 form determines the deductions employers take out of workers' pay, this form needs to account for these changes. The new form will require more specificity from taxpayers and should account for households in which a wage earner has more than one job.
It accounts for whether spouses will file a joint tax return. It also requires disclosing dependents to be claimed during tax time. The child tax credit of $2,000 per child and the dependent tax credit of $500 per dependent will also need to be addressed in the new form. Instructions regarding the deductions a taxpayer may claim when filing an income tax return. Certain income that does not have taxes withheld must also be disclosed.
Purportedly, the IRS's aim is to help taxpayers here in Massachusetts, and elsewhere in the country, get their taxes right so they get better refunds and owe less on April 15. However, this new form set to be released for 2020, could create a conundrum for many taxpayers. They will need to figure out how to balance what they want to bring home during the year versus what they could end up receiving or paying when they file their taxes. What the final form will look like remains to be seen, and tax attorneys across the country will be watching so they can properly advise their clients.