The Internal Revenue Service issues a new Form W-4 every year for employees to withhold tax. Since the IRS requires everyone to pay their taxes gradually throughout the year rather than paying them when you file a tax return, your employer will withhold tax even if you don’t fill out a W-4.
The Forms W-4 simply determines the right amount of tax that you need to withhold. In previously issued Forms W-4, you would claim allowances. The 2020’s Form W-4 removed the allowances from the employee’s withholding form. Instead of claiming allowances based on the information you’ve provided on the Form W-4, you simply enter the information used to determine how many allowances you should claim.
With that being said, there is no way for taxpayers to claim fewer allowances to boost their tax withholding or claim more to reduce the amount of taxes withheld. You simply will enter the amounts regarding your dependents, anticipated tax deductions and credits, extra withholding amount, and income outside of jobs if you want to withhold tax for it. Overall, the changes occurred in 2020 makes the Form W-4 much simpler and accurate for taxpayers.
As of mid-2020, it is too early to speculate any changes to the Form W-4. Since the IRS issues the new tax forms by end of the year, we should have them sometime in November or December. However, the agency is likely to release a draft version of Form W-4 for 2021 in May or June as with any other year.
Although we do not expect the allowances to be back at the Form W-4, nobody can know it for sure. But the overall changes that happened in 2020 should remain the same in 2021. The changes to Form W-4 may occur in later years as it has been how the IRS makes changes to the tax forms.
*The IRS hasn’t issued the employee’s tax withholding form for 2021 yet. As soon as the IRS releases the new form, our post will be updated with a link to view, download, and print the updated form.