Before the changes, the number of personal exemptions an employee had were the basis of the withholding calculation made with information collected on the W-4. The Tax Cuts & Jobs Act (TCJA) eliminated the deduction for personal exemptions, so revisions to the W-4 were necessary after tax law changes. The increase in the standard deduction and child tax credit and the lowering of income tax rates also contributed to the need to revise the W-4.
The new form and its instructions are shorter than the old version - 2 pages down from 4 previously. This is mostly a result of the elimination of several worksheets that needed to be completed in order to complete the form. However, the new instructions reference 12 other IRS publications and forms that an employee might need to use to complete the new W-4.
The form has additional lines to report additional non-wage income, wage income from a spouse, itemized or other deductions, and the child tax credit or other credits. The IRS has stated that anyone not wishing to provide this information to an employer can use the withholding calculator on the IRS website or Publication 505, Tax Withholding and Estimated Tax, in order to calculate their withholding.
Some have voiced their concerns to the IRS that the new form raises privacy issues and would increase the burden on employees and employers. They believe that many employees will not want to disclose the additional income and spouse wage income information that is to be included on the form. The new form also places the responsibility of calculating some tax credits on employees for inclusion of those amounts on the new W-4. Estimating these amounts incorrectly could lead to much more or much less withholding than an employee needs.
The new Form W-4 is not final and additional changes could be made before the end of the year. We will keep you updated as these changes and a final version of the form are released.