Ok! Your employer just told you that you have to fill in a new W-4. You are thinking so what, I’ve done that before. But surprise! Remember how the new tax law changed a whole bunch of stuff we had gotten used to? And how they mucked with the withholding tables and your 2018 tax refund was less than you expected (because all that sweet cash went into your pocket during the year and you spent it at Starbucks)? Well, it took an entire year but they have redesigned the W-4 to tie more closely to our new tax landscape. And lemme tell ya, it’s a doozy.
Here’s a link to the new form and a link to some FAQs. Take a look:
If you are single with just W-2 income and your spouse does not work, congratulations, this form will work for you! Just do Step 1 and sign at Step 5 and your are done. If you have a couple kids it’s still pretty easy, fill in Step 3. But if life is anymore complicated than that, buckle up.
Step 4 is if you have other income, investments, rental property, a small business, etc. The more money you put on line 4(a) the MORE they will withhold from your paycheck. How much more? I have absolutely no idea. Line 4(b) is if you want LESS withheld from your paycheck. Do not do this. Something like 95% of taxpayers are now under the standard deduction. If you put money on this line you will risk owing tax.
This brings us to Step 2. Step 2 gives me hives. If you have more than one job, or are married and your spouse works you need to complete this step. You have three choices. You can go through the IRS’s tax estimator and then enter the result on 4(c)? Maybe? I don’t know. Or you can work through the worksheet on the third and fourth pages of the W-4 form. Or (and this is my favorite) you and your spouse can sit down and fill in your W-4s together, and if you make about the same amount of money you can each click the little box next to line 2(c). Because it is totally normal that spouses sit together and fill out forms for work.
The best part of all of this? This is for 2020. Which means we won’t have any idea if this works or not until we do your taxes in 2021. Great.
If I figure out how to do this I will update this post. But right now that worksheet just makes me nauseous.