IRS to release new, more complex W-4 form this year(usatoday.com)
usatoday.com
IRS to release new, more complex W-4 form this year
https://www.usatoday.com/story/money/2019/04/09/tax-withholding-irs-release-new-more-complex-w-4-form-year/3401811002/
26 comments
Write your congress critter and have them delay implementing this until they do it as a simple online calculator instead. The first users should be congress critters and their staff.
Already exists.
https://apps.irs.gov/app/withholdingcalculator/
https://apps.irs.gov/app/withholdingcalculator/
Someone at the IRS hasn't learned about the <label> tag.
This is truly horrible code. As a long-time web developer, it's very painful to see how crappy this is.
As someone who has built tax calculators for the web before, this hurts. Doesn't really do anything to simplify what's going into the calculation for ordinary taxpayers. And the way it shows errors is very jarring.
This is a privacy nightmare. I do not want to share my other sources of income, mortgage deductions and other key financials with my employer.
So don't. Put it all down as zero.
Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete.
I won't be worrying about it. I already pay estimated taxes to account for my extra income.
Can't you just set it to zero and forget about it?
If you have a single source of income and don't mind over-withholding (and getting a refund come tax time), yes.
If you want to reduce the amount you're withholding (so you pay less during the year, and receive less of a refund), you have to claim allowances. And the way those connect to the amount actually withheld isn't entirely straightforward (it's the tables starting on Page 48 at [1]).
And then it gets way more complicated if you have multiple sources of income, because the withholding calculations don't work in that case (underestimates your withholding, and you end up owing the IRS money at the end of the year).
I haven't seen the new form and can't say whether or not it's actually any better, but it can't be much worse; the current W-4 is one of those forms that looks simple ("just" two numbers to punch in) but turns out to be a fair bit more complicated.
[1] https://www.irs.gov/pub/irs-pdf/p15.pdf
If you want to reduce the amount you're withholding (so you pay less during the year, and receive less of a refund), you have to claim allowances. And the way those connect to the amount actually withheld isn't entirely straightforward (it's the tables starting on Page 48 at [1]).
And then it gets way more complicated if you have multiple sources of income, because the withholding calculations don't work in that case (underestimates your withholding, and you end up owing the IRS money at the end of the year).
I haven't seen the new form and can't say whether or not it's actually any better, but it can't be much worse; the current W-4 is one of those forms that looks simple ("just" two numbers to punch in) but turns out to be a fair bit more complicated.
[1] https://www.irs.gov/pub/irs-pdf/p15.pdf
Unlikely. You sign the W-4 statement:
Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete.
Where you must have at least an allowance of 1, for yourself. And why would you want fewer allowances? That results in more withholding, which is an interest free loan to the government.
You can claim a withholding exemption only if last year's tax liability was zero, and if you expect this year's tax liability will be zero.
Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete.
Where you must have at least an allowance of 1, for yourself. And why would you want fewer allowances? That results in more withholding, which is an interest free loan to the government.
You can claim a withholding exemption only if last year's tax liability was zero, and if you expect this year's tax liability will be zero.
> And why would you want fewer allowances?
Because you have investment income that is otherwise untaxed. I know someone who put 0 and still owed money at the end of the year, but didn't have to make quarterly payments. She had enough investment income to owe, but not enough to hit penalty levels of owing.
Because you have investment income that is otherwise untaxed. I know someone who put 0 and still owed money at the end of the year, but didn't have to make quarterly payments. She had enough investment income to owe, but not enough to hit penalty levels of owing.
I don’t think that oath prevents you from putting zero allowances.
Nothing on the form states that the number of allowances you claim needs to match the worksheet’s results.
The IRS online calculator will explicitly give you different allowances to claim than the worksheet does.
The penalty of perjury would apply if you used a fake SSN or address.
Nothing on the form states that the number of allowances you claim needs to match the worksheet’s results.
The IRS online calculator will explicitly give you different allowances to claim than the worksheet does.
The penalty of perjury would apply if you used a fake SSN or address.
> Where you must have at least an allowance of 1, for yourself. And why would you want fewer allowances? That results in more withholding, which is an interest free loan to the government.
If you have other income that's not easy to setup withholding on (such as stock related income, a home sale, or rental income), it can be useful to have more withholding from employment income. A benefit is that you are allowed to pretend withholding is evenly distributed over the year, even if it's not, or if it's more beneficial, you can use the actual timeline for withholding, although that takes a lot more effort.
If you have other income that's not easy to setup withholding on (such as stock related income, a home sale, or rental income), it can be useful to have more withholding from employment income. A benefit is that you are allowed to pretend withholding is evenly distributed over the year, even if it's not, or if it's more beneficial, you can use the actual timeline for withholding, although that takes a lot more effort.
That applies to your personal information, and your answer to Question 7 (if you are exempt from withholding entirely), which is the only affirmative statements you make on the form.
Lines 5 and 6 are choices the taxpayer makes based on their expected level of withholding. The worksheet is not submitted, and not completed under penalty of perjury.
You can absolutely over-withhold and just put zero. The IRS has zero issue with that whatsoever.
Lines 5 and 6 are choices the taxpayer makes based on their expected level of withholding. The worksheet is not submitted, and not completed under penalty of perjury.
You can absolutely over-withhold and just put zero. The IRS has zero issue with that whatsoever.
One reason I've used 0 in the past is to allow for multiple income sources (e.g., an employee at one company and a self-employed side project). The worksheet allows for negative offsets to be added into the final deduction count recorded. It avoids the need to deal with quarterlies if the withholding amounts are close enough.
You might want fewer allowances if you have another source of income for which nothing has been withheld.
The only way for me to avoid making payments is to specifically ask for an additional amount to be withheld in addition to claiming an allowance of 0.
The only way for me to avoid making payments is to specifically ask for an additional amount to be withheld in addition to claiming an allowance of 0.
There are no allowances on the new W4.
Is this the preview of the new W-4? Line 5...
[1] - https://www.irs.gov/pub/irs-dft/fw4--dft.pdf
EDIT: Apparently not. Would have been nice if TFA could have shown up the draft form?
[1] - https://www.irs.gov/pub/irs-dft/fw4--dft.pdf
EDIT: Apparently not. Would have been nice if TFA could have shown up the draft form?
Not sure what "it" is in this scenario, but if you owe too much in April, there's a penalty and you may need to pre-pay the following years' taxes; and if you are refunded too much, you have granted the government a large, zero-interest loan. I also believe that, however unlikely, lying on your W-4 is technically punishable by fines/jail/whatever.
is Zero an option anymore, or is this entire article about how they are making the form more accurate instead of just picking a nearby number out of a hat?
"IRS to make it easier to calculate your correct withholding rate" would be a more accurate headline
The current w-4 is almost impossible. Taxes are way more complicated than last year. There are more rates. More different kinds of income. It's almost a tax return.
But there aren't more rates. There were 7 different Federal income tax brackets in 2017[1], and there are 7 different brackets under the new law for 2018[2].
[1](https://taxfoundation.org/2017-tax-brackets/) [2](https://taxfoundation.org/2018-tax-brackets/)
[1](https://taxfoundation.org/2017-tax-brackets/) [2](https://taxfoundation.org/2018-tax-brackets/)
Sure, if all you have is a W-2 and no kids.
The rates referenced are only for ordinary income. But it's not just the rates... it's the base. Most people do not understand that different types of income are taxed very differently.
In addition to ordinary tax rates, there are 3 different capital gains rate (0%, 15%, 20%), Then there's the 25% depreciation recapture rate and the 28% collectibles rate. Then 3.8% Net Investment Income tax will be added to that, but only the amount over the threshold not the full amount of your investment income. Don't forget the capital loss limitation. How do you apply the rate if you can't deduct more than $3K in a year regardless of how much you've lost?
Which brings me to passive income & how only passive losses can offset it.... and how you can't deduct the any passive losses if your AGI is > $150K.... unless you're a real estate professional. Oh but if you have passive rental income, that could be subject to the 3.8% tax on top of your ordinary tax.
Even if you just have a W-2, you may also have to pay 0.9% Additional Medicare Tax on certain wages...how much depends if you're married or not.
And even in you only have ordinary income, what you're really looking for an effective tax rate. But to determine that, you have to take into account the tax credits which you may or may not get depending on your AGI, & a host of other factors. And then how much of your deductions will actually count towards reducing your taxable income. High state tax folk are figuring that out now.
Then there's the lovely 20% Qualified Business Income...which you might get, or you might not. depending on what type of business you have and if you pay wages. But if you have REIT or PTP dividends (read investors), you get that deduction no matter what...which means that your actual rate on that income is really 80% of the nominal rate referenced.
Hopefully you're getting my point: It's a myth that you can take "income" & multiply it by the marginal rate in the table to calculate your actual tax liability.
It's so much more complicated than that. ... Oh, and then tax reform sunsets in 2026 & we're right back to the 2017 tax law more or less.
The rates referenced are only for ordinary income. But it's not just the rates... it's the base. Most people do not understand that different types of income are taxed very differently.
In addition to ordinary tax rates, there are 3 different capital gains rate (0%, 15%, 20%), Then there's the 25% depreciation recapture rate and the 28% collectibles rate. Then 3.8% Net Investment Income tax will be added to that, but only the amount over the threshold not the full amount of your investment income. Don't forget the capital loss limitation. How do you apply the rate if you can't deduct more than $3K in a year regardless of how much you've lost?
Which brings me to passive income & how only passive losses can offset it.... and how you can't deduct the any passive losses if your AGI is > $150K.... unless you're a real estate professional. Oh but if you have passive rental income, that could be subject to the 3.8% tax on top of your ordinary tax.
Even if you just have a W-2, you may also have to pay 0.9% Additional Medicare Tax on certain wages...how much depends if you're married or not.
And even in you only have ordinary income, what you're really looking for an effective tax rate. But to determine that, you have to take into account the tax credits which you may or may not get depending on your AGI, & a host of other factors. And then how much of your deductions will actually count towards reducing your taxable income. High state tax folk are figuring that out now.
Then there's the lovely 20% Qualified Business Income...which you might get, or you might not. depending on what type of business you have and if you pay wages. But if you have REIT or PTP dividends (read investors), you get that deduction no matter what...which means that your actual rate on that income is really 80% of the nominal rate referenced.
Hopefully you're getting my point: It's a myth that you can take "income" & multiply it by the marginal rate in the table to calculate your actual tax liability.
It's so much more complicated than that. ... Oh, and then tax reform sunsets in 2026 & we're right back to the 2017 tax law more or less.