Many people were disappointed to find that they owed money to the IRS (or received a substantially reduced refund) after they filed their tax returns this year. The IRS is now considering even more changes that could cause headaches beginning in the 2020 tax season.
By now, the W-4 form is all too familiar. New employees fill it out and list how many dependents they have so the employer knows how much to deduct for their taxes. Employees have a good idea of how to balance it so they can choose whether to get a refund every year or have to plan to pay the IRS on April 15 (or thereabouts).
A new, revised draft of the W-4 form is being circulated that requires employees to estimate their annual income when they complete it. This information is then submitted to the employer. Aside from the confusion, there are myriad potential pitfalls with this approach.
We spoke with tax attorney Danielle Dryden about the proposed changes. Dryden said, “It’s a potential nightmare. First, the new form is confusing, and many people will be overwhelmed by it. Second, disclosing your income to your new employer could provide them justification to withhold raises. Third, the withholding doesn’t account for unexpected changes in income. I think their approach is going to result in a higher proportion of our taxpayers having to pay additional taxes and penalties every year.” You can read more about the proposed changes on her tax information blog.
It should be noted that this is not the first revision proposed. The first was scrapped after receiving an overwhelmingly negative response from tax professionals across the US. If you wish to comment on the new form, please email [email protected] before July 1st, 2019.
(Danielle Dryden is owner of Dryden Tax Resolution, LLC. She is licensed to represent clients with IRS issues from all 50 States. She can be contacted at (813) 666-7601 or via email at [email protected])