New W-4 is complex, intrusive

The federal government wants to make sure you pay your taxes in full and on time. So it has designed a new W-4 form.

It should not come as a surprise that the new form is complicated and it even requires an online app or long worksheet to complete it properly.

No longer will you simply list the number of allowances (dependents) so your employer can determine the appropriate withholding. Now a complicated formula will determine how much should be withheld for taxes — not only on your salaried income, but on your side jobs, or even your spouse's self-employment income.

The 2020 W-4 will be given to all new employees, and those whose tax status has changed in the past year. If you didn't get divorced, have a child or change jobs, you won't be required — but will be encouraged — to fill out the new form.

Alice Jacobsohn of the American Payroll Association, which is helping employers explain the new format, concedes that the new longer form can be intimidating. And, when pressed, she notes that you're not actually required to input all that information — only to make sure you pay your taxes on time and in full.

The new form comes with its own long set of instructions. In step 1, you state your name, address, Social Security number and filing status (single, married, head of household). If you then skip to step 5 and just sign the form, your employer must rely on your withholding status (single, married, head of household) and can't otherwise reduce or increase your withholding. That means you might not have accurate withholding, resulting in payments and possible penalties or a refund.

But steps 2-4 add more precision to the process. In step 2, you can add information about other income if you have multiple jobs or if your spouse has a job. In fact, there's a handy online tool to help you estimate how much should be withheld if you find yourself in this position. You can find it at www.irs.gov/W4App. Or you can do it yourself, with the worksheet that is part of the form.

In step 3 you can claim credit for a dependent child under age 17 as of Dec. 31. They're worth $2,000 each, if your income is under $200,000 ($400,000 married, filing jointly). That's also where you can claim foreign tax credits and education tax credits.

Then step 4 lets you add in other adjustments, such as retirement income, stock dividends and interest — if there has been no withholding at the source. In this section, you can also ask for extra withholding if you want a refund when you file next year. And the worksheet and app also have a place to calculate your deductions for qualifying home mortgage interest, charitable contributions, state and local taxes (up to $10,000), and medical expenses in excess of 10% of your income.

By now you've figured out that the formerly simple task of filling out your W-4 form can be as complicated as actually filing your tax return. But you can still do it the old-fashioned way. Let your employer follow IRS form instructions and withhold from your salary — and keep the rest of your income private. Then file quarterly estimates, paying taxes on your other income throughout the year.

You'll be safe as long as you pay in at least 100% of your income tax liability from last year, or at least 90% of the current year's estimated taxes (assuming your income is under $150,000). Then, only the IRS will know your total family income. And you might not get a refund.

That's the price of privacy over convenience. And that's The Savage Truth.