Major revisions to the withholding tables were made in January 2018 as a result of the 2017 Tax Cuts and Jobs Act. At that time, the W-4 design did not change and asked for the number of allowances to be claimed. Since personal allowances were eliminated with the new Act, it is hoped that the new form will better align withholdings with employee tax liabilities when tax season comes around.
In May of this year, the IRS issued a draft of the new Form W-4. In August, a second draft was issued, and the final version of the form is expected to be released in November. The most recent draft copy can be found here: https://www.irs.gov/pub/irs-dft/fw4–dft.pdf
The draft is not yet ready for current use and employers are advised to continue to use the current Form W-4 until the final version is released.
Employers must begin using the form for new employees hired after December 31, 2019. Employees hired prior to 2020 will not be required to fill out a new W-4, unless they wish to make changes to their federal withholding. Employers must continue to withhold based on the most recently signed W-4. If an employee does not fill out a W-4, the employer must treat them as a single filer with no adjustments to withholding.
What is changing? Mainly, there will be no withholding allowances, due to changes from the 2017 Tax Cuts and Jobs Act. The form will be more simplistic and provide more accuracy and employee privacy. The form will have easier instructions for taxpayers who hold multiple jobs or have side consulting income and need extra withholdings.
Employers may request that all employees fill out the 2020 W-4 but should explain that they are not required to submit a new form and that their previous W-4 on file is sufficient to continue withholding.
Further, to assist with your decision on whether to increase or decrease your withholdings, there is a newly designed Tax Withholding Estimator at the IRS website: https://www.irs.gov/individuals/tax-withholding-estimator.
If you have any questions about the new Form W-4, contact the professionals at Gilliam Bell Moser LLP