Following the first official tax season after the Tax Cuts and Jobs Act (TCJA) was enacted, the IRS has been exploring ways to assist taxpayers have a better tax year in 2020. That includes replacing the old Withholding Calculator with the new Tax Withholding Estimator.
The Tax Withholding Estimator assists taxpayers in completing the Form W-4 correctly to ensure the correct amount of tax is withheld from employees’ paychecks based upon their personal situations. The Tax Withholding Estimator is available at the link below:
HR Partners recommends sharing this link with employees as a courtesy. By checking their paychecks and utilizing the Tax Withholding Estimator, employees can avoid facing an unexpected tax bill or penalty in April of 2020.
Why the need for a checkup? Under the TCJA, many individual taxpayers experienced significant changes. Those changes included new tax rates, limits on the deductions for state and local taxes (SALT taxes), a cap on the amount that you can borrow for purposes of the home mortgage interest, and exclusions for certain kinds of job-related expenses.
Additionally, employers should expect major changes to the Form W-4 in 2020 based on feedback from the payroll and tax communities. The new design reduces the complexity and increases the transparency and accuracy of the withholding system. While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.
HR Partners specializes in ensuring each of our valued clients are compliant with all laws and regulations applicable to their respective businesses. Please call us today and we will be pleased to assist you with any HR compliance issue you may be experiencing or exploring.
Source: Internal Revenue Service (2019, August 14). FAQs on the draft 2020 Form W-4. Retrieved from https://www.irs.gov/newsroom/faqs-on-the-draft-2020-form-w-4