IRS Pushes Back Major Revision to W-4 to 2020 Returns

The IRS announced a delay in making major revisions in the Form W-4, announcing in a Treasury Department Press Release that the revised form will be released for 2020, not 2019.

The release states:

Today the Treasury Department announced that the IRS will implement a redesigned W-4 form for tax year 2020, a timeline that will allow for continued work to refine the new approach for the form. As a result of the enactment of the 2017 Tax Cuts and Jobs Act, Treasury and the IRS are revising the wage withholding system and Form W-4, Employee’s Withholding Allowance Certificate.  In June, the IRS released a draft redesigned form for public comment and received many helpful suggestions for improvements, which they are working to integrate.

“The Treasury and IRS are working diligently to implement the most comprehensive tax legislation in more than 30 years,” said Secretary Steven T. Mnuchin. “Launching the redesigned form in 2020 will allow the Treasury and the IRS to properly implement changes to the withholding system and ensure taxpayers have a positive and simplified experience.”

The revised form, issued in June, had been criticized for being overly complex and requiring information on the form, submitted to the taxpayer’s employer, that contained information that raised privacy concerns.  

The work on the revised form will continue as described in the Treasury notice:

The Treasury and IRS will continue working closely with the payroll and the tax community as additional changes are made to the Form W-4 for use in 2020. These additional changes will make the withholding system more accurate and more transparent to employees. The IRS will release the 2020 form and related guidance and information early enough in 2019 to allow employers and payroll processors ample time to update their systems.

Treasury announced that, instead of revising the majorly revised form in time for use in 2019, it would be releasing a new draft form that presumably will be similar to the 2018 version:

For tax year 2019, the IRS will release an update to the Form W-4 that is similar to the 2018 version currently in use. The 2019 form will be released in the coming weeks according to the usual practice for annual updates.

Advisers should note that while this is likely the only realistic option for the agency short of simply issuing the much-maligned 2019 draft as final, the changes made by the Tax Cuts and Jobs Act make the current W-4 a very imprecise tool for ensuring that a taxpayer has proper withholding from his/her paychecks.