When it comes to tax preparation, staying on top of changes to the law is crucial. This is especially important as it pertains to withholding allowances, which were revised in the draft W-4 form that was introduced last June. Here’s how these changes will impact taxpayers in 2019.
How the New W-4 Form Compares to the Previous Version
Because of the alterations made by the IRS, the new form looks different than the 2018 version. For instance, the form now takes up an entire page complete with 13 fields, while the previous form was only half of a page with 10 fields. Instead of a single line for employees to write in withholding allowances, they now have four to work with.
In the past, the total number of allowances was listed in Line 5. Now, these allowances are divided into lines 5, 6, 7, and 8, so employees can indicate specific dollar mounts. On the current form, Line 5 is for nonwage income, Line 6 features itemized deduction amounts, Line 7 reports credit items for tax liabilities, and Line 8 is for married couples filing jointly or those with multiple jobs.
Why the New Form Was Created
The new version of the W-4 was created in response to the 2017 Tax Cuts and Jobs Act, which made significant changes to tax rates, deductions, and withholding calculations. Employers can now use the amounts listed on the new form when withholding income tax from their employees’ earnings. For this reason, the IRS urges employees to provide as much information as possible in Lines 5 through 8. While this information is not actually required, the IRS states that it provides a clearer perspective to employers, so they can calculate employee tax amounts correctly. These changes are designed to make the withholding system more transparent to employees.
If you find the above changes confusing, hire the services of a tax preparation professional. America's Favorite in Dallas, TX, offers skilled tax services to both individuals and business owners, ensuring your return is filed accurately and on time. They can help you find the right forms and provide insight on what information you should provide. If you’re facing an audit, they can walk you through the process step-by-step, from helping you compile specific documents to making your case to the IRS. They can also help you secure credits and deductions, which will lower your overall tax burden. If you need help with tax preparation, schedule a consultation today by calling (214) 919-0170, or visit their website for more helpful hints.