Author: Diane Pineda

Diane Pineda is a staff accountant at KRS CPAs.

Form W-4: What Changed and Why it Matters

Form W-4 was revised after the 2017 Tax Reform Act. Here’s what you need to know to complete it accurately.

Form W-4 is completed by employees to advise their employers of the amount of federal income tax to withhold from their paycheck. Your employer will then remit the money withheld to the IRS along with your name and social security number. The tax withheld will be applied against your total income tax liability when you file your tax return in April.Form W-4: What Changed and Why it Matters

In the past this has been a relatively simple and straightforward form to complete. However, the Form W-4 has been changed as a result of the passing of the TCJA back in late 2017.

Revised W-4 adds more detail

The major factor here is that the passing of the TCJA has gotten rid of all personal and dependent exemptions which affects the necessary and required amount of tax that needs to be withheld from your paycheck.

The revised Form W-4 issued by the IRS was intended to assist employees in making a more accurate determination of their income tax withholding needs based on the tax law changes. This new form is more detailed and includes various sections of specific withholding related information to help guide employees in accurately calculating the proper withholding amount.

Page one of this form includes questions relating to the various sources of income you may have, dependents you can claim, and other income affecting adjustments. Step One involves providing general personal information as seen on the previous form. You will list your name, address, social security number, and filing status. The following steps two through four should only be completed if they apply to you.

Form W-4 Step One
Step Two is for persons who work multiple jobs and have working spouses. There are three different methods to accurately calculate what the proper withholding should be based on your situation. You will need to calculate the correct amount of withholding based on the income earned from all jobs.

Form W-4 Step Two
Step three accounts for certain tax credits associated with claiming dependents. Step four allows you to use your discretion to make any other adjustments to your withholding based on other income, deductions, and extra withholding that you may need to consider.

Form W-4 Step ThreeThese form changes have been implemented as a response to the withholding issues that arose during the first year of the new tax law changes.

We’ve got your back

Tax season is getting underway. Are you ready? Trust KRS CPAs to help you with your tax strategy and preparation. Contact me at [email protected] or 201.655.7411 to learn more.

Sources:

https://www.cicplus.com/w-4-changes-for-2020/
https://www.irs.gov/pub/irs-dft/fw4–dft.pdf
https://www.staffone.com/resources/w-4-forms/

Stay in Touch With Your Accountant Even After Your Tax Return is Filed

Tap your CPA’s knowledge and experience

As your business grows so do the complexities of complying with the regulations and requirements that may apply to you and your business. Your accountant is available to assist with accounting and compliance issues. In a business environment where these rules and regulations are constantly changing you want to be sure you are covered. Make sure you keep the lines of communication open throughout the year and take advantage of all the knowledge and expertise your accountant has to offer. The added value from keeping in touch with your accountant could extend well beyond tax services.

How is your business actually doing?

COMPLIANCE conceptIf you are familiar with basic accounting and maintain your own set of books, but can’t seem to make sense of the reports your accounting software is producing it may be time to sit down with your accountant. This is a great way to analyze how your business is actually doing. Your accountant is well versed in what your cash flow and finances are comprised of and could be an extremely useful resource when it comes to planning your future, setting goals, and assuring growth.

Consider outsourcing your bookkeeping

Success and growth may mean that more time and focus is needed with daily operations. The accounting and tax rules and regulations that become applicable are also more complicated than what you may have seen in the past. Allowing your accountant to take charge of the bookkeeping tasks allows you to focus on managing your business and creates a relationship where there is constant communication.

Together, you can develop a strategic plan for the future while discussing aspects of your business that may need change or attention. The conversations and accuracy of the financial reports will provide you with an accurate understanding of your businesses profitability and allow for accurate projections to be made which results in an easier tax filing season.

Ask questions

You should be asking your CPA questions about the financial aspects of your business that you may not be familiar with and would like to learn more about. These conversations can lead to you feeling more comfortable and confident while making informed decisions to assure a successful business.

Stay in touch

Your accountant can offer the proper guidance needed to make you consider all possible outcomes, consequences, or opportunities that may arise when making business decisions. Keeping them informed about any significant changes is imperative to avoid negative repercussions when it comes to accounting or compliance issues. Be sure to stay proactive in keeping your accountant apprised of decisions regarding your personal finances, business engagements, and any other significant changes in your life. With expertise in many different areas, your accountant can offer you insight and support even after you’ve filed your tax return.

Additional resources

If you haven’t yet found the CPA that’s right for you, check out the post, “How to Choose the Right Accountants.”  The post, “Does Your Small Business Need Help with Bookkeeping Tasks” can help you decide if outsourcing these important tasks is right for your small or mid-size business.