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IRS to table changes planned for Form W-4 until 2020

By Kenneth Hausser, CPP, Iselin, N.J.; Debera Salam, CPP, Houston; and Debbie Spyker, CPA, Washington

Please note: This item is from our archives and was published in 2019. It is provided for historical reference. The content may be out of date and links may no longer function.

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Editor: Michael Dell, CPA

The IRS announced that as a result of feedback from payroll and tax professionals, extensive changes it had planned to make to the 2019 Form W-4, Employee’s Withholding Allowance Certificate, will be postponed until 2020.

Last year, the IRS published a draft of the 2019 Form W-4 and instructions intended to better incorporate the personal income tax changes under the law known as the Tax Cuts and Jobs Act, P.L. 115-97, that took effect Jan. 1, 2018.

As proposed, in lieu of allowing employees to claim withholding allowances, the draft Form W-4 would have given them the option of providing annual dollar amounts for:

  • Additional nonwage income such as interest and dividends;
  • Deductions from income for the household, such as itemized or other deductions;
  • Income tax credits expected for the tax year; and
  • For employees with multiple jobs, total annual taxable wages for all lower-paying jobs in the employee’s household.

Employers would have been required to adjust the employee’s pay period taxable wages according to the annual dollar amounts entered on the proposed Form W-4.

Implications

This IRS announcement brings welcome relief to employers and payroll software providers that faced making extensive changes to the federal income tax withholding calculation for 2019.

In preparation for planned changes expected to the Form W-4 in 2020, the IRS says it will continue to work closely with the payroll and tax communities.

The proposed Form W-4 would be far more complex, making it more difficult for employees to complete correctly. Accordingly, employers may want to consider whether or how they would provide Form W-4 training or other assistance to their employees.

Finally, the draft Form W-4 would likely not conform for state income tax withholding purposes. Accordingly, states that currently use the Form W-4 could require that a unique state form be used.

EditorNotes

Michael Dell is a partner at Ernst & Young LLP in Washington.

For additional information about these items, contact Mr. Dell at 202-327-8788 or michael.dell@ey.com.

Unless otherwise noted, contributors are members of or associated with Ernst & Young LLP. Ernst & Young previously published versions of these items as Tax Alerts.