New W-4 forms reflect more accurate withholdings
Why is there a new W-4?
The previous W-4 relied on the number of exemptions in conjunction with your filing status and income. Due to changes in the Tax Cuts and Jobs Act of 2017, personal exemptions on your individual tax return became suspended.
Instead, the standard deduction was significantly increased. The new W-4 takes this significant change into consideration.
Does everyone have to fill out a new W-4 for their employer?
You are not required to fill out a new W-4. However, employers may request you fill one out. If you do not fill out a new W-4, your withholdings will be based on the previous W-4 you filed with your employer, and your income tax withholdings may not accurately represent how much withholdings you should have under the new tax law.
The benefit to filling out a new W-4 is that you have a better chance the income tax withholding calculated will be closer to your actual tax liability because it is based on the new tax law and your current earnings and life changes.
What information does someone need if they do fill out the new W-4?
If you have multiple jobs, or you file your income tax return using Married filing joint or head of household, some additional information may be needed to complete the W-4 accurately. First off, you will need your name, address, Social Security number and the filing status you will use to file your income tax return. You need to have an expectation of how much your income will be and how many children and/or other dependents you will be claiming.
If you have investment income you are given an opportunity to include that income so taxes can be withheld from your wages.
If you intend to itemize your deductions instead of using the standard deduction, you have the opportunity to include that amount in the calculation, as well. You can also request additional withholdings if you would like to. If your household has multiple jobs, you should be prepared to fill out the worksheet for Step 2(b).
What reasons should be considered in filling out a new W-4?
As discussed above, if you haven’t filled out a new W-4 since the new tax law came into effect you should consider doing so.
Other reasons to consider filling out a new W-4 include; you purchased your first home, you got married, you had a child, you took a new job and your salary/wages changed, or you started a side business. These are just a few things that can cause a change in your tax liability and solid reasons to consider updating your W-4.
Paula Burkes, Business writer