The IRS issued a draft version of the 2019 Form W-4, Employee's Withholding Allowance Certificate, and summary instructions for the form, in an attempt to further simplify the task of determining income tax withholding for individual taxpayers after the passage of P.L. 115-97, known as the Tax Cuts and Jobs Act of 2017 (TCJA). The TCJA eliminated personal exemptions, increased the standard deduction, increased the child tax credit, limited or discontinued certain deductions, and changed the tax rates and brackets. The 2018 Form W-4 and instructions were four pages, whereas the 2019 draft form and summary instructions, which is stamped with a June 5 issue date, is less than two pages. On June 7, the IRS released a draft version of the full instructions for the 2019 Form W-4. In earlier years, the IRS did not issue separate instructions for Form W-4.
The IRS cautioned that taxpayers should not rely on draft forms, instructions, and publications for filing. It added that it provided the draft form as a courtesy, and though it does not usually release draft forms until it has incorporated all changes, it anticipated that in this case the final form would have changes.
Most of the shortening of the draft 2019 Form W-4 and summary instructions is due to eliminating the "Personal Allowances Worksheet," the "Deductions, Adjustments, and Additional Income Worksheet," and the "Two-Earners/Multiple Jobs Worksheet" from the instructions. The form itself, due to the TCJA changes, no longer has a line to report the number of allowances the taxpayer is claiming.
However, the form has lines added for the optional reporting by the taxpayer of nonwage income not subject to withholding, itemized deductions and other deductions and credits, and wages of members of the taxpayer's household who have lower-paying jobs. In the instructions, the IRS states that taxpayers who do not want to give their employer this additional information can use the withholding calculator on the IRS website and can consult IRS Publication 505, Tax Withholding and Estimated Tax, to calculate any tax credits and any additional amount they would like withheld from each paycheck.
AICPA comments
The AICPA's Tax Executive Committee sent a letter to the IRS on July 12, urging the Service to simplify the proposed draft 2019 Form W-4, to reduce administrative burdens by not requiring an annual Form W-4 calculation, protect employees' privacy by omitting personal information from the form, and avoid shifting the responsibility to employers to determine employees' correct withholding.
The letter, from Tax Executive Committee Chair Annette Nellen, said the form should be simplified so that it does not include nonwage income, itemized and other deductions, tax credits, and amounts of income from lower-paying jobs. Requesting this personal information requires employees to essentially calculate their tax liability, the letter noted. It also is potentially an invasion of privacy because the employer will see the employee's personal information.
To protect employees' privacy, the AICPA emphasized that employees should not have to divulge spousal and other family income to have their withholding calculated correctly. The old form asked for this information on a separate worksheet, which the employee would keep for his or her records. The employer did not see it.
Finally, the AICPA emphasized that the new form puts the onus on employers to accurately calculate employees' withholding. The form would essentially need to be updated every year, whereas it was previously only required for new employees or when an employee had a significant life change that would affect his or her tax liability.
The AICPA pointed out that it is unclear how much due diligence is required of employers to correctly determine their employees' tax withholding. It recommended that the IRS issue a revised Publication 15 (Circular E), Employer's Tax Guide, to help determine the employee's withholding.
