Do you know what a W-4 is?

In another post I discussed that some taxpayers noticed much smaller refunds (or none at all) for the 2018 tax year just ended. While there’s not exactly an app for that . . . your friends at the IRS have re-designed the tax form which determines the amount of federal tax with held from your paycheck.

This is not a tax form you file with IRS - you file the W-4 Form with your employer. The last time you’ve probably seen one of these is when you started your current job - you have to fill them out to be added to a US payroll. If you haven’t filled a new one out since the tax law change of 2017 (effective 2018) and you would like to have a larger refund, or if you had to pay when filing, you should get with your HR folks and do that. The new W-4 won’t will be released later this year and won’t be effective until tax year 2020. But you can adjust your withholding on the old one - for the rest of the 2019 tax year. You will definitely want to update when the new Form W-4 is published. If you’re employer does not ask you to fill out a new W-4, ask them.

HINT: This is not a W-4

HINT: This is not a W-4

What’s new about the new Form W-4? “The new design reduces the form's complexity and increases the transparency and accuracy of the withholding system," according to a Treasury Department fact sheet. "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."

I’ll withhold judgment on whether the finalized form is actually less complex. IRS always say that about ‘improved’ form but it’s seldom true. But the updated form W-4 it will definitely comport more closely with the new tax law than the old form.

The IRS (and me) encourage all workers to check their withholding using an online calculator so they aren't surprised next year with their refund size. It IS NOT too late to adjust your withholding for this year.

Average refunds were smaller this year and the IRS sent out about $7.5 billion less in refunds this year.