Wednesday, January 15, 2020

Single and 0 No Longer Exists - The New W-4

If you started a new job, you may have had to fill out a new W-4 this year - and there are BIG changes.

The old W-4 used Single or Married and a number of exemptions to determine your withholding. The new W-4 just uses your filing status, and thus your standard deduction, to determine withholding based on how your income drives you through tax brackets. It's not easy to see, but you essentially get a base withholding amount based on this filing status and income. The W-4 doesn't show this amount, which is why the next part is confusing. You then either stop, and take this withholding, or calculate a dollar amount to add or subtract from this withholding based on your tax situation.

If you have one job, no kids and no deductions, you can essentially just fill out your name, address and filing status and be done, or make a manual adjustment to get a bigger or lower refund.

More complicated situations should be handled using the Tax Estimator at the IRS website (link at end of article). If you want to get it solid, have a paystub handy for every job (including your spouses), and every other source of income handy when doing it. It will use the information input to print out W-4's for all jobs. It will make a withholding adjustment to the highest paying job to account for all the differences from the standard withholding. UPDATE: It appears that the Estimator is no longer preparing W-4's for you, but it still gives the information needed to make adjustments to your W-4.

It seems more complicated, but is actually much easier than last year's, and should be far more accurate than previous year's W-4's.

You should do the estimator early in the year, and repeat it when you change jobs. A checkup in October can be helpful to make sure you are on track.

Here's the link:

Check out my book on the Trump/GOP tax Law, that also has updates for the late 2019 tax law changes:

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