Friday, July 26, 2019

2020 Draft of the W-4


The Internal Revenue Service released the 2020 draft for Form W-4 on May 31, 2019.


For most taxpayers, the draft of the 2020 W-4 intends to simplify the process of reporting the amount of federal withholding an employee wants from each paycheck. Anyone who wishes for a more accurate calculation of their federal withholding can answer a set of straightforward questions on the worksheets.
Two other ways to handle withholding are to use worksheets for individuals with other sources of income who wish to calculate additional withholding amounts. The employer will not be provided these sheets, thus assuring the taxpayer’s privacy. An employee can also use a Withholding Calculator to determine the most accurate withholding.
In the draft 2020 W-4, there are no more allowances but, rather, a shift toward dependents and deductions to align with the new tax law.  For example, the Child Tax Credit increased to $2,000 for children younger than 17 (and $500 for other dependents). Some itemized deductions that are still on the books include qualifying home mortgage interest, charitable contributions, state and local taxes (SALT), and medical expenses in excess of 10 percent of one’s income. However, due to the changes in the tax law, significantly fewer people will itemize deductions because of the increase to the standard deduction, as well as the cap to SALT ($10,000). 

Source: Paychex

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