New W-4 is com­plex, in­tru­sive

Orlando Sentinel - - SUCCESS -

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 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.

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