In 2020, the IRS revised Form W-4 to eliminate withholding allowances and simplify the tax withholding process with a five-step format, making it easier to adjust for personal changes and ensure accurate withholding.
Understanding the Updated IRS Form W-4 – Simplifying Tax Withholding in 2024
According to the report of TheStreet, in 2020, the IRS changed how people calculate their tax withholding, leading to updates on IRS Form W-4. Before, people used “withholding allowances” to decide how much tax should be taken from their paychecks, with each allowance reducing the amount withheld. This system was based on personal and dependent exemptions, which the Tax Cuts and Jobs Act of 2017 removed. The IRS then introduced a new W-4 form that got rid of allowances and made it simpler to calculate withholding according to current tax laws.
The new Form W-4 has a five-step process to help people get their withholding right. You provide personal details, consider multiple jobs or spousal income, claim any tax credits you’re eligible for, and make adjustments for things like extra income or deductions. Though the form is longer than before, many find it easier to use and understand, helping avoid surprises when filing taxes.
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2020 IRS Form W-4: Simplified Tax Withholding Process Begins – What You Need to Know!(2020 figures) (PHOTO: Investopedia)
Why Updating Your IRS Form W-4 is Essential After Major Life Changes
You might need to update your tax withholding if you go through big life changes like starting a new job, getting married, or having a baby. The IRS suggests filling out a new Form W-4 in these situations to make sure the right amount of tax is taken from your paycheck. You can fill out and submit a new form whenever you need to adjust your tax payments.
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