Big Changes for Form W-4

Just when you thought you had a firm grasp on all the tax changes, the IRS is making a dramatic change to the way tax withholdings are calculated on your paycheck.

Form W-4, used to calculate your paycheck withholdings, has had a major overhaul, and the changes go into effect on January 1, 2020.
 
Here's what you need to know:
 
The withholding allowance system is gone. The previous form converted your tax situation into a number to determine the proper withholdings. You would take one allowance for yourself, your spouse and each dependent. The new form nixes the numeric allowance system, and instead asks you to provide estimates for income, deductions and credits. A new worksheet is included to help households with more than one job calculate the amount to withhold.
 
More accurate paycheck withholdings. The goal of the new form is to help you anticipate your tax liability in the new income tax environment. If properly prepared, this new version should provide payroll processors with the information they need to more accurately calculate the tax withholdings from your paychecks. But to accomplish this, you will need to make calculations and fill out worksheets on the front end.
 
Required for withholding changes after December. You are not required to submit a new form for 2020, but any changes to your withholdings after Dec. 31 will have to be done using the new version of Form W-4. Old forms using the allowance system will no longer be allowed to update your withholdings.
 
Tax planning is more important than ever. Unless you have a very straightforward tax situation, you will now need to provide a basic tax forecast on the new Form W-4. Accounting for all income, deductions, credits and potential changes to your situation that may arise in the next year are key components to an accurate forecast. Running through the tax planning process now will get your tax withholdings started off right for 2020.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

---