With Children’s Friend staff over 400 strong, I was awaiting the IRS publication of the new Form W-4. As expected, it rises to a level of complexity for our dedicated payroll team.
As a CPA, I was a little excited to test drive the IRS’s new withholding calculator. Using this online tool in lieu of filling out the recently revised Form W-4 (both links are below) was a bit overwhelming at first – but I got the hang of it!
In some ways, it’s a substitution game in measuring the number of allowances we should claim. Prior to 2018, some of us would take a simple measurement of how many people were in our family – say a family of four. When the oldest child is on their own, we take it down a notch to three. I like when things are simple and it makes sense.
Now that personal exemptions no longer apply, other factors carry more weight. This includes your income, filing status (Single, Head of Household, Married…) and the number of dependents under the age of 17 (for the child credit). In order to take this for a test drive, I would suggest having a recent pay statement handy to plug into this tool.
Should note two items:
- This is at the federal level only, so if you change your withholding allowance based on the IRS’s new withholding calculator or completing the IRS Form W-4, you should probably not change your State withholding allowance. For example, Rhode Island still uses the number of exemption.
- It is recommended to review your number of allowances at least annually, especially at the beginning of each year.
- IRS revised W-4: https://www.irs.gov/pub/irs-pdf/fw4.pdf
- IRS Withholding Calculator: https://www.irs.gov/individuals/irs-withholding-calculator