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The IRS has proposed an update to the Form W-4 that it says will increase its accuracy and reduce its complexity. But experts caution that it will feel different to employees and may prove a bit more difficult for some.

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Employees currently fill out a one-page form that asks a few questions about their household to help their employer determine how much to withhold from their pay for federal taxes. Any more complex legwork takes place on worksheets that not all workers complete.

Under the proposed update, released Friday, employees would still face a one-page form with a more simple default option. But for those who have second jobs, spouses who work, income from other sources or have dependents, they will need to do a bit of legwork that is a bit different.

"It's going to be a little more work than people are used to," said Pete Isberg, vice president of governmental affairs at ADP, a payroll services provider.

The IRS is making the update in the wake of the overhaul of federal tax law. The new tax law did away with the personal exemptions that are essentially the backbone of the current W-4. A new version of the form was needed to better reflect this and other changes to the law so a more accurate amount is withheld from pay for workers.

The proposed draft is open to public input until July. A final version will take effect in 2020. Existing employees will not have to fill out the new form, but new hires will starting Jan. 1.

The U.S. Treasury and IRS worked closely with the tax and payroll community over the past year in developing the form. And several of those involved said that this form does reflect an improvement over earlier attempts, which were more onerous and raised privacy concerns.

Source Link:
https://www.foxbusiness.com/markets/irs-proposes-update-to-form-w-4-to-increase-accuracy

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