Tax season is right around the corner, and for most of us, that means getting a much-looked-forward-to refund.
For some people, tax refunds mean vacation funds, catching up on bills and credit owed, and a chance to buy things they normally couldn’t. If you’re one of those people, you’ll want to read about the upcoming changes, because they won’t be easy!
Upcoming Tax Withholdings Changes
The main goal that the Internal Revenue Service is hoping to achieve, is that taxpayers ultimately wouldn’t be owed money, and wouldn’t owe money either. In other words, they want the amount of money taken out each year to be more accurate. Unfortunately, this is easier said than done.
In a draft of the new tax withholdings form they’re hoping to implement, workers are asked to input the following type of information:
- Expected Income Tax Credits for the year
- Itemized Deductions
- Nonwage income, including dividends and interest
- Total annual taxable wages for taxpayers who have multiple jobs.
Complexity of Tax Withholding Changes
This change was supposed to be implemented sooner, but the IRS scrapped 2019 plans that they had to start using the new W-4 form, and now have plans to start rolling it out in 2020.
The IRS will ask for public comment on a new draft version of the tax withholdings form that is expected to be ready by May 31. Agency spokeswoman Anny Pachner says, “We encourage taxpayers to take advantage of that opportunity and send us comments on the redesign.”
Another thing to keep in mind is that most states use the existing W-4 for withholding, and might release their own forms following the change. Making sure you have the right kind of information on hand ahead of time for the change, such as pay stubs, last year’s tax returns or 1099 forms, will be more important than ever.