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IRS holds off on major W-4 changes until 2020

Published on November 2nd, 2018 by Triton Benefits & HR Solutions

Despite releasing a draft version of the updated form W-4 in June 2018, the Internal Revenue Service recently announced the planned changes for 2019 will be rolled back until 2020.

According to a press release from the U.S. Department of Treasury, the redesigned W-4 will be implemented for the 2020 tax year, as opposed to 2019, to allow more time for the associated changes to be made.

"As a result of the enactment of the 2017 Tax Cuts and Jobs Act, Treasury and the IRS are revising the wage withholding system and Form W-4, Employee's Withholding Allowance Certificate," the Sept. 20, 2018 press release stated. "The Treasury and IRS will continue working closely with the payroll and the tax community as additional changes are made to the Form W-4 for use in 2020."

Expected changes

As noted in our August blog post, the TCJA had created a number of payroll- and human resources-related changes, including those that would impact employee withholdings. The IRS released a draft version – which it noted was not to be circulated to employees. In this instance, the released draft version was a special case, as the IRS typically does not put forth draft versions until all potential changes are incorporated.

As the Department of Treasury noted in the Sept. 2018 press release, the IRS also requested public comment on the draft version, and is now in the process of integrating these suggestions for improvement into the updated Form W-4 for 2020.

"The Treasury and IRS are working diligently to implement the most comprehensive tax legislation in more than 30 years," Secretary Steven T Mnuchin stated in the press release. "Launching the redesigned form in 2020 will allow the Treasury and the IRS to properly implement changes to the withholding system and ensure taxpayers have a positive and simplified experience."

Within the previous draft form, some of the changes encompassed:

  • Line 5: Total number of allowances eliminated.
  • Line 5: Estimated additions to income.
  • Line 6: Estimated deductions from income.
  • Line 7: Expanded tax credits for dependents.
  • Line 8: Special instructions for additional income from multiple jobs.

Check out our blog to learn more about these changes within the previously-released draft version of Form W-4, and what they mean for taxpayers and employers.

Holding off on implementation: What does this mean for the 2019 tax year?

Although the original draft version of Form W-4, updated in light of the TCJA, was expected to be implemented for the 2019 tax year, the IRS's deferral here means that business and their HR teams have additional time to make the associated updates to their internal payroll systems.

While employees may not need to file a completely new form for this tax year, experts advise workers to take another look at the information their employers have on file, just to be safe.

"The IRS made a few changes for 2018, and determined that employees would not be required to complete a new Form W-4 for 2018," stated the Automatic Data Processing Research Institute. "However, it was strongly recommended and for some people it may still be advisable."

This is particularly important for employees who may have undergone significant life changes within the past year, including marital status. In this way, it's beneficial for internal HR teams to educate employees about this update, and advise staff members to examine their current W-4 form to ensure that all information is accurate.

Check back for additional updates, including those related to the TCJA and other tax laws. And for details about updating your internal payroll system, connect with the experts at Triton today.