One of the most frustrating changes that came with the new tax laws last year was the inaccuracy of the new withholding tables. Many people were unpleasantly surprised at tax time to discover that although their total tax had been reduced, their withholding had been reduced even further, resulting in a balance due to the IRS.
The solution to this problem was the development of more accurate withholding tables, which led to the need for a more accurate W-4 form. Many of us have had the experience of filling out the current W-4 as “single with 0 allowances” (even though we’re married with kids) and still not having enough tax withheld from our paychecks. An updated form was long overdue.
The new W-4 is expected to be released in January, and the good news is that it will be more accurate.
The bad news is that it’s a bit more complicated to fill out.
Here’s what to plan for:
- If you file as single, married filing separately, or head of household, and you have one job, take the standard deduction, and don’t have much in the way of other income, you can check one box and be done!
- If you have multiple jobs, or you file jointly and you and your spouse both have one or more jobs, it’s going to be complicated. But, there’s a much better chance that you’ll get the correct amount withheld from your paychecks, which will result in fewer surprises come tax time.
- When it comes time to fill out your W-4, you’ll want to gather the latest paystub from each job, along with the latest statements from all pensions, retirement accounts, and all sources of “other
income.” You’ll need information from all of them.
- Check your 2018 tax return to determine whether you itemized deductions or took the standard deduction. If your itemized deductions added up to more than the standard, and you expect a similar amount in the year to come, you’ll want to include the deduction amount on your
W-4.
- Keep in mind as you go that your W-4 won’t show a total amount to be withheld. Your employer’s payroll system will calculate the standard withholding based on your filing status, and in Steps 2, 3, and 4, you’ll provide additional information that will impact that standard withholding rate.
Right now, you can use the IRS’ Tax Withholding Estimator to get an idea of what to expect on your 2019 tax returns. In January, you’ll be able to use the same tool to figure out how much “extra withholding” (in addition to the standard) you should put on your W-4.
We’ll put step-by-step instructions on the blog once the new W-4 has been officially released, so check back if you need help filling it out.