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)

The IRS has released new proposed rules related to charitable contributions made to get around the $10,000/$5,000 cap on state and local tax (SALT) deductions. The proposed regulations:


Final regulations provide rules on the attribution of ownership of stock or other interests, for determining whether a person is a related person with respect to a controlled foreign corporation (CFC) under the foreign base company sales income rules. The regulations also provide rules to determine whether a CFC receives rents in the active conduct of a trade or business, for determining the exception from foreign personal holding company income.


The IRS has issued final and proposed regulations implementing the base erosion and anti-abuse tax (BEAT) under Code Sec. 59A. The BEAT is a minimum tax that certain large corporations must pay on certain payments made to foreign related parties, and was added by the Tax Cuts and Jobs Act ( P.L. 115-97).


The IRS has issued highly anticipated final regulations on the significant changes made to the foreign tax credit rules by the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97). The final regulations retain the basic approach and structure of the 2018 proposed regulations ( NPRM REG-105600-18). The final regulations also eliminate deadwood, reflect statutory amendments made prior to TCJA, and update expense allocation rules not updated since 1988.


The IRS has released guidance that provides that the requirement to report partners’ shares of partnership capital on the tax basis method will not be effective for 2019 partnership tax years, but will first apply to 2020 partnership tax years.


The IRS has released final regulations that present guidance on how certain organizations that provide employee benefits must calculate unrelated business taxable income (UBTI) under Code Sec. 512(a).


The IRS has issued Reg. §20.2010-1(c) to address the effect of the temporary increase in the basic exclusion amount (BEA) used in computing estate and gift taxes. In addition, Reg. §20.2010-1(e)(3) is amended to reflect the increased BEA for years 2018-2025 ($10 million, as adjusted for inflation). Further, the IRS has confirmed that taxpayers taking advantage of the increased BEA in effect from 2018 to 2025 will not be adversely affected after 2025 when the exclusion amount is set to decrease to pre-2018 levels.


The Treasury Inspector General for Tax Administration (TIGTA) has released a report on suitability checks for participation in IRS programs. TIGTA initiated this audit to assess the effectiveness of IRS processes to ensure the suitability of applicants seeking to participate in IRS programs and to follow up on IRS planned corrective actions to address prior TIGTA recommendations.


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