Manuel DaRosa, CPA
Accounting and Tax firm with offices in Taunton and Mansfield, MA
NEWSLETTERS

You’re not the only one taking a “new year, new me” approach to 2020. Even the IRS is changing things up — it just debuted a new Form W-4.

Form W-4, the official name for the Employee’s Withholding Certificate, is a document workers fill out so their employers can determine how much federal income tax to deduct from their paychecks. This redesign, necessitated by the 2017 Tax Cuts and Jobs Act, is the first big update Form W-4 has gotten in roughly three decades,  according to the New York Times.

The IRS says the makeover “reduces the form’s complexity and increases the transparency and accuracy of the withholding system.” Rather than forcing taxpayers to fill out “complicated worksheets,” they’ll answer “more straightforward questions.”

But what does that mean for you and your taxes? Well, if you do the new Form W-4 voluntarily and get a more precise withholding number, your tax refund will be lower.

What’s Different in the New W-4?

One major shift is that Form W-4 doesn’t use allowances any more.

Previously, the value of an employee’s allowances was tied to their personal exemptions, or the amount of money each taxpayer could automatically deduct for themselves and their dependents.

But personal exemptions were eliminated in the Tax Cuts and Jobs Act. The standard deduction and child tax credit went up instead, according to the Tax Policy Center.

The new Form W-4 calculates withholding by having you complete five steps. Step 1 is just your personal information like your name and Social Security number, and Step 2 is about multiple jobs and spouse work if you have them. Step 3 is for dependents; Step 4 is for other adjustments. Finally, Step 5 is your signature. Not all the steps are required for everyone.

 Who Needs to Fill Out a New W-4?

People who start new jobs in 2020 are required to complete the new form. If you’re with the same employer as in 2019 or before, though, then they’ll just keep doing what they’re doing — determining your withholding based on your most recent Form W-4.

However, it’s not a bad idea to do a “withholding checkup” whenever you have a big lifestyle change, like if you get married, become divorced or have a baby.

If your employer does ask you to fill out a new W-4, you’ll need to use the upgraded version of Form W-4. It is our recommendation that everyone selects single in Step 1 and then checks off the box in Step 2.

As always, feel free to call our office if you have any questions

Visit us at our new location 311 Somerset Ave., Taunton, MA 02780. Our Mansfield office remains at 100 Copeland Drive, Suite 6, Mansfield, MA 02048. 



Tax Alerts
Tax Briefing(s)

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The Fifth Circuit U.S. Court of Appeals ruled that the Patient Protection and Affordable Care Act’s (ACA) ( P.L. 111-148) individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power. However, the central question of whether the rest of the ACA remains valid after Congress removed the penalty for not having health insurance remained unanswered. Instead, the case was sent back to the district court to reconsider how much of the ACA could survive without the individual mandate penalty.


Proposed qualified opportunity zone regulations issued on October 29, 2018 ( REG-115420-18) and May 1, 2019 ( REG-120186-18) under Code Sec. 1400Z-2 have been finalized with modifications. The regulations. which were issued in a 550 page document, are comprehensive.


The IRS has issued final regulations that provide guidance on transfers of appreciated property by U.S. persons to partnerships with foreign partners related to the transferor. Specifically, the regulations override the general nonrecognition rule under Code Sec. 721(a) unless the partnership adopts the remedial allocation method and certain other requirements are satisfied. The regulations affect U.S. partners in domestic or foreign partnerships.


The IRS has released Publication 5382, "Internal Revenue Service Progress Update / Fiscal Year 2019—Putting Taxpayers First." This new annual report describes accomplishments across the agency, and highlights the work of IRS employees during the past year. It covers a variety of taxpayer service efforts, including development of the new Taxpayer Withholding Estimator, as well as operations support efforts on areas involving information technology modernization, human capital office initiatives, and others.


Bridget Roberts, the Acting National Taxpayer Advocate, released her 2019 Annual Report to Congress. The report discusses the key challenges facing the IRS regarding the implementation of the Taxpayer First Act, inadequate taxpayer service and limited funding of the agency. Further, Roberts released the third edition of the National Taxpayer Advocate’s "Purple Book," which presents 58 legislative recommendations designed to strengthen taxpayer rights and improve tax administration.


The IRS has modified the applicability dates for proposed regulations under Code Sec. 382 that were issued with NPRM REG-125710-18, September 10, 2019 (2019 proposed regulations). The IRS is withdrawing the text of the proposed applicability dates, and proposing revised applicability dates. The newly issued proposed rules would also provide transition relief.


The Treasury and IRS have issued final regulations on the due diligence and reporting rules for persons making certain U.S. source payments to foreign persons. Guidance is also provided on reporting by foreign financial institutions on U.S. accounts. The regulations are effective on the date the regulations are published in the Federal Register.


Taxpayers have been provided with additional guidance for complying with the Code Sec. 871(m) regulations on dividend equivalent payments for 2021, 2022, and 2023. The Treasury Department and the IRS intend to amend the regulations to delay the effective/applicability date of certain rules. Further, the phase-in period provided in Notice 2018-762, I.R.B. 2018-40, 522, has been extended.


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