An IRS form W-4, currently known as an Employee's Withholding Allowance Certificate is used for calculation of federal income tax from an employee's pay. This form is going through a massive overhaul based upon the 2017 Tax Cuts and Job Act. The new design is intended to reduce complexity and increase the transparency and accuracy of the withholding system.
Although employees are not required to complete new withholding forms, software companies who provide payroll software must update their systems to allow for calculation using the new methodology. In August, the IRS released a draft of the form which is being used to make the programming changes using a 5-step methodology embodied in the form.
Sage Software has recently held webinars designed to help partners navigate the new rules and educate how these changes will be accommodated in products like Sage100cloud. The IRS has also recently released the final W-4 form with minimal change from the draft.
There are too many changes to be covered in a blog post, but the IRS has created a IRS W-4 FAQ web page specifically covering the changes and what they mean to an employee and an employer. The IRS has also recognized that the way people work today is far more complex than the good old days when people held a single job. The IRS provides the W-4 form, has created a Withholding Calculator designed for multiple-earner families and a new Publication 505 for people with really complex situations.
Note: On 2020 Form 1099 MISC, nonemployee compensation income will no longer be reported in Box 7. Non-employee compensation will be reported on form 1099-NEC (form not finalized) and due date for reporting has changed to January 31st.
For more information on how I-BN solution can handle these upcoming changes, contact one of our solution experts at 678-627-0646 x230 or firstname.lastname@example.org.