The Internal Revenue Service recently unveiled a draft version of Form W-4, Employee’s Withholding Allowance Certificate. The revised form is in response to changes made by the Tax Cuts and Jobs Act and aims to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors. It is open for review and feedback until July 1, 2019. 

We want to remind our clients that this is only a draft and the new form will not be used until 2020. However, we are closely following this and will continue to provide updates. Below is a high-level summary of what we know so far.

What’s being proposed? The new form will account for:

• Multiple sources of income within your household.
• Claiming dependents, specifically factoring in the $2,000 child tax credit for each kid under 17 or the $500 credit for other qualifying dependents.
• Providing additional details of income that didn’t have taxes withheld upfront such as interest, dividends and retirement income.
• The number of deductions you anticipate to claim, thus reducing your withholding and allowing you to take more money home.

The final draft is expected to be released mid-to-late July. We will continue to monitor changes to Form W-4 and keep you abreast. In the meantime, we encourage taxpayers to make sure they have the right amount of tax taken out of their paychecks and thus avoid a larger tax bill next year. Taxpayers with major life changes, including marriage or a new child, should especially check their withholding amounts. 

Determining how much to withhold depends on your unique financial situation. The professionals at Hamilton Tharp can help, call us today for a paycheck checkup.