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Draft W4 for 2019


Abby Normal

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I love that you can now just enter an amount you want withheld and not bother with the rest of the form. I tell my clients all the time how much they need withheld per paycheck and they always ask how they do that. Now they can just put that amount on a W4 and be done.

It will be interesting to see the withholding calculations that accompany this. Will it be difficult to calculate manually?

Married people with other income are likely not going to choose to let their employers know those amounts.

I wanted a redesign of this form but this isn't it. I would have just two lines for withholding, one for dollar amount you want withheld and one for % you want withheld, and you choose whichever works best for you. I like the idea of everyone knowing what percentage their taxes actually are.

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2 hours ago, Abby Normal said:

 

It will be interesting to see the withholding calculations that accompany this. Will it be difficult to calculate manually? 

 

Ha ha, it will never get easier...

Looking only at the form, my guess is employers will have to have a way to input - in addition to the current ability for the employee to ask for additional withholding - additional "untaxed" income (which will then be added to the earnings before tax calculation).

Annualized Wages + Line 5 + Line 8 = Annual taxable income (as earned and declared by employee)

Calculate withholding (annualized)

Less Line 6 and Line 7

Divide by paydays per year

Add Line 9 to get withholding on current check

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Or, by pay period after dividing the W4 annual employee figures by paydays per year.

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No "allowances" means the "old somewhat allowed" way of indicating a specific amount per check (high allowances, desired amount as "additional") will be gone.

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It looks as if just marking a reasonable "status" will be a safe course.  The withholding calculations appear to factor in the standard deduction (the reason for the status, and for deducting the standard deduction if using line 6.

For most, meaning those who do not seek professional advice, the new form will be harder to get to a balance due situation.  For those seeking advice, it appears no more difficult to get accurate than current.

I have increased my "harping" on employers requiring a federal W4 form, and a separate form (W4, or whatever the state requires).  For safety, NO MORE one form for both!  Separate forms remove any conflicts, since it will take years for states which use any part of federal calculations  to come up with their own changes.  One state has already screwed up, since they are saying to use the federal W4 with additional entries, which actually invalidates the form for federal purposes...  (Note, my perspective is heavily tilted towards protecting employers, and using invalid W4 information can cause harm to the employer.)

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13 minutes ago, ILLMAS said:

Has anybody established a fee yet so when the calls start coming in?

I was discussing this at lunch and threw out $45, but that's more for low wage hourly workers, that you can do in 5-10 minutes.

The problem with a flat amount per paycheck is hourly workers whose hours can vary a lot. So unless the dollar amount is prorated based on hours, smaller paychecks would get crushed.

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1 minute ago, Abby Normal said:

I was discussing this at lunch and threw out $45, but that's more for low wage hourly workers, that you can do in 5-10 minutes.

The problem with a flat amount per paycheck is hourly workers whose hours can vary a lot. So unless the dollar amount is prorated based on hours, smaller paychecks would get crushed.

This type will likely be the ones who need zero assistance, other than maybe, if they ask, to "not" enter any figures in 5, 6, 7, 8, or 9.

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There is simply a large amount of misinformation about W4 already.  I recently had the "privilege" of teaching a local quasi government agency.  They provide supported work training.  Their clients earn min wage, for a short time while training.  Most, if not all, do not work enough to even be required to file a return, and most do not have the knowledge to do so even if they were required (meaning they are likely paying someone to manage their affairs, or are conserved).  The agency was not even asking for W4 forms, somehow thinking it was easier to use single zero for all.  (Probably true, as asking for a W4 would no doubt have involved office time.)  I had one person submit a proper form marked as exempt.  This caused a phone call, where the agency was not so subtlety asking me to not use the form, since the agency would have to send it to the IRS because it was marked as exempt.  I could not hold back, and ranted about screwing those who need the couple of dollars now, not later, and that their "policy" was likely costing their clients money, as many would not file a tax return (for the refund), or those that did, were having to pay for (in money or time) an unneeded return, which could cost more than the refund.  I then pointed out it has been years since the IRS required any employer to forward a W4...

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3 hours ago, Evan S. Golar said:

I see that the option for "Married, but with to withhold at single rate" was removed

I'll advise married two-income couples to both choose single and just list their own wages. With the married brackets being twice the single brackets, it should get them close. If not, adding a flat additional amount is an easier solution than playing around with allowances.

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5 minutes ago, Abby Normal said:

I just submitted a comment to split line 9 into 9a-flat amount and 9b flat %, that you can choose one or the other.

It will never happen but I had throw my two cents out there.

The new form, to get a flat dollar amount, one could enter a large figure in 6 and or 7, enough to get withholding to zero (based on the calculations), then enter the desired amount per check in 9.

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My point was, that flat dollar amounts are only good for salaried people, and hourly people with a steady schedule. It's crazy for people who work overtime one week and very little the next week. For them, a percentage would be better.

Also, the instructions say to just leave 5-8 blank if you want to use a flat amount.

It's gonna be messy at first.

 

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I just read the directions and reviewed the form.

I have not worked very much at salaried or hourly jobs but I never knew what my annual income would be. 

Would be really hard pressed to compute my future income if I was a new hire and/or new to workforce. 

Line 5 is for non wage income, Line 8 is for multiple jobs. where do you compute annual wages from primary job.?

IRS calculator is going to be busy and HR department cannot tell the employee what to put on W-4. 

I am assuming that payroll is going to compute the withholding based on filing status?

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Another wrinkle is that the new form is coming out now, and half the year will be over by the time the new declarations affect paychecks.  Many workers had a lot less withheld starting in February, so even if the new W4 is right on the money they could still come up short.

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36 minutes ago, SaraEA said:

Another wrinkle is that the new form is coming out now, and half the year will be over by the time the new declarations affect paychecks.  Many workers had a lot less withheld starting in February, so even if the new W4 is right on the money they could still come up short.

 

This is the draft form for 2019.

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Indeed. QuickBooks and all the other payroll software will have to program for these new rules.

I'm curious to see if the full standard deduction will be part of the withholding calcs once again. It used to be, but about 20 years ago they changed it to be a small fraction of the standard deduction, so less people would owe when filing, saving on collection efforts and processing payments.

I'm still concerned about all the under-withholding that's happening in 2018. Taxpayers who were losers under the new law, still saw their withholdings go down.

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15 hours ago, Lloyd Hudson said:

I am assuming that payroll is going to compute the withholding based on filing status?

Primarily, yes. If you choose single and no other income is listed, you get the new standard deduction (or some portion of it-remains to be seen), and taxes are calculated based on the single tables. This will be the default for most people going forward who either can't or don't want to let their employers and HR departments know about their other income or spouse's income.

They've managed to make the W4 more complicated than it was. I've always pushed for simplification. <sigh>

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ADP has an article on this:

Employees will be “strongly encouraged, but not required” to complete a new W-4 for 2019. Employers will still be able to use 2018 and prior Forms W-4 for employees that don’t complete a 2019 W-4. As a result, payroll systems will need to maintain both 2018 and 2019 withholding systems and calculations simultaneously.

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I just re-read the instructions and I'm confused about how this is going to work.

In the example of a married couple with 3 jobs, you choose married and report the 2 lower paying jobs on the highest paying job's W4. Then the middle paying job, reports the lowest paying job, which means it's been reported on two W4s. And the lowest paying job reports no income from other jobs.

It seems like they're going to increase the withholding on the higher paying jobs to make up for the under-withholding on the lower paying jobs. That's 100% opposite of how I think it should be done, but if it results in reasonable withholding in total, I guess that's ok.

The more I think about this, the less I like it.

 

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15 hours ago, Lloyd Hudson said:

where do you compute annual wages from primary job

Your employer know what your wages are. It seems the goal of this form was to have your employer do a projected tax return for you, to see how much tax you really should be having withheld.

Except for being able to enter the child tax credits, I don't care much for this form.

People were used to changing allowances to adjust their withholding up or down. Now the only way to decrease withholding is to enter an amount on lines 6 or 7, unless they'll allow a negative amount on line 9... but I wouldn't trust the payroll department to enter it as a negative. So, basically, you'll have to lie to decrease your withholding.

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We always remind employers it is not the employer's place to discuss how to prepare a W4.  That is what the employee's tax person can be paid to help with, if the employee needs help.   Looking at the form, I suspect most "normal" employees will not need special instruction, provided they even submit a new form.  The other employees have likely been dealing with management of their withholding before, and have the means to create a valid new form.

For the calculation, the IRS is giving a clue (via the W4 instructions) how the calculations will be different, with a section titles "Instructions for Employer".  For computerized payroll, no real problem calculating.  For those using tables, more steps, but speed is not likely important to those using tables :).

The tables will still have allowance columns, as it was important to not require new W4 forms.

Spit balling, I will probably add W4 setup for the new W4 "lines". The existing field to enter allowances can remain, as a visual clue as to the 2019 defaults, and to also show the value entered prior to 2019.  If any numbers are added in the new lines, the allowances will be set to the defaults.  I would rather not show the allowances if a new W4 is used, but many employees like to check their checks, and most will use the tables.  I think for clarity, the new line figures will need to somehow be reflected on the stub, meaning the employee will have the means to reverse calculate their withholding.  Not sure exactly how yet, but it should not be difficult.  Probably some way to show the wages, the adjustments, and the total used for taxable.

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Just now, B. Jani said:

There is a webinar on 06/21/18 for "Understanding How to use the IRS withholding Calculator to check and correct Withholding".

May this will help.

It may help for the remainder of 2018, but for 2019, there will be the new W4 form to deal with... For most here, it will be learning how to assist clients in filling out the new form.  While I do not do many tax returns, the new W4 form appears easier (for a tax preparer) to provide numbers for, since the employee can include exact figures of additional income and credits to consider for withholding calculations.  Yes, it is different, but change does equal income, for those of us on the business side...

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