The new form W-4 draft for 2020 is out there for public opinion. Given the columns in the form, it seems to be a comprehensive statement of sources of income, expenditure, exemptions, and credits. There is a bright side to such exhaustive information collection. You may not need to withhold too much of tax and wait for a hefty return after a year. In fact, such exhaustive statements may help you come up with the exact amount of withholding. Yet, how much to be withheld depends entire on the sources of income, claims, credits and deductions of your household, not just you. Nevertheless, the new form would obviously translate to withholding a larger amount from paychecks of employees in the form of federal tax.

What Are the Distinguishing Features of the New Form

The most distinguishing feature of the new W-4 form is that it has done away with personal exemptions. This had been an exceptional feature of the old tax regime. One could claim personal exemptions based on the number of dependents and yourself. It used to be $4,050 per person when it ceased to exist. Moreover, almost everybody could claim these exceptions. So, that is a big blow in the new form. 

There is another bad news. The new form also proposes that those going beyond claiming the standard deduction, need to supply detailed information about itemized deductions on line 4b of the form. This may include charitable contributions, mortgage interest, deductions applicable for local income taxes, medical expenses, student loan interest, etc. 

The new form has been designed in such a way that it compels you to account for stuff like:

• Number of family members in your household holding a job 
• Deductions you want to claim.
• Source of income for which you did not withhold any payment.
• The income of your dependents. 
• Other incomes like interests, dividends, retirement income, etc., for which you are not withholding any tax. 
• A combined annual taxable wage of all family members if they are engaged in lower paying jobs. However, you need to fill up this section if you have a second job, or if your wife or husband has a second job which is more remunerative than the one under discussion.

However, you can take into account:

• $2000 tax credit accounting for each child 
• $500 for dependents.

The Problem 

The biggest problem with filling up this form is that you may have to sift through old returns and get references from about 12 other forms. 

There is no doubt that employers and taxpayers would be forced to disclose personal information. Moreover, the form is difficult to understand. So there may be some unpleasant surprises in 2020 after filing for tax withholding. 

The Repercussion 

There is no doubt that it will lead to withholding more tax than existing. It may also lead to people withholding more tax than is really needed. As you know, the tax refund is interest-free. This is why the need of the hour is to itemize all deductions and also take into account all credits, household incomes, etc. With this, you can make sure that you get the right amount of tax as withholding payment.