A revised draft of the 2020 Form W-4 is to be released by the Internal Revenue Service by the end of the summer, an agency official said Aug. 1.
The second draft of the withholding form initially was expected to be released by July 31. However, the agency still is reviewing comments submitted regarding changes to Form W-4, Employee’s Withholding Allowance Certificate, the official said during the agency’s monthly payroll industry teleconference.
The revised draft of Form W-4 is not to be substantially different from the first draft, which was released May 30, the official said. The form is to be adjusted to address privacy concerns and its instructions are to be clarified, the official said.
Changes to the form were required because the federal tax code overhaul (Pub. L. 115-97) suspended the use of personal exemptions in figuring individual tax liability. Withholding allowances reported on the form were based on personal exemption amounts.
A second draft of Publication 15-T, Federal Income Tax Withholding Methods, also is to be released by the end of the summer, the official said. The publication, for which a first draft was released June 6, contains instructions for withholding using the 2020 Form W-4 and Forms W-4 from previous years.
Comments were due July 1 for the 2020 Form W-4 and July 8 for Publication 15-T. A final version of Form W-4 is expected to be released in November.
Truncated Social Security Numbers
Regulations allowing employers to shorten Social Security numbers on employee copies of Forms W-2, Wage and Tax Statement, also apply to employee copies of Forms W-2c, Corrected Wage and Tax Statement, that are filed after the regulations take effect, said Eliezer Mishory, an official in the IRS office of chief counsel.
The truncation rules (T.D. 9861) first apply to 2020 Forms W-2 filed in 2021.
The regulations are silent on whether the Social Security number on Copy 1 of Form W-2, the copy sent to state and local governments, may be truncated. Scott Mezistrano, IRS representative for industry stakeholder engagement and outreach, said the Federation of Tax Administrators, an organization representing state tax departments, is conducting a poll of states’ opinions on truncation of the Social Security number on Copy 1.
W-2 Verification Program
A pilot program to verify the authenticity of Form W-2, Wage and Tax Statement, data is expected to return for filing season 2019, an IRS official confirmed Aug. 1.
The program, which ended its pilot status for 2018 returns, was introduced in 2016 and used a 16-character code to authenticate employee data and match individual tax returns with the proper refund amount. Participating payroll service providers include the code in Box 9 of copies B and C of employees’ Form W-2 that are filed electronically. The 2019 Form W-2 now has Box 9 unavailable.
In a statement on its website, the IRS stated its intention to continue the program. Assuming that the program gains approval, participating employers and payroll-service providers would have to create an odd-numbered box on a substitute Form W-2, Mezistrano said during the teleconference. The agency does not anticipate issuing a revised 2019 Form W-2 to accommodate the change, he said.
Substitute forms must conform to IRS guidelines, Mezistrano said. Information on substitute Forms W-2 can be found in instructions on the IRS website. A date for resumption of the program was not released.
Verification codes appeared on about 59 million W-2s during the 2018 tax filing season. The payroll-service providers that used the code included ADP LLC, Ceridian, Interlogic Outsourcing, Intuit, National Finance Center, Paychex, Paycom, Payroll People, PrimePay, and Ultimate Software.
New Nonemployee Compensation Form
Changes to Form 1099-MISC are expected as a new draft form for reporting nonemployee compensation for tax year 2020 was released for comment, an IRS official said.
A draft of Form 1099-NEC, Nonemployee Compensation, was released July 24 by the IRS. The form is to replace the amount of compensation paid to independent contractors that is reported in Box 7 of Form 1099-MISC. The 1099-NEC would be filed by Feb. 1, 2021, the draft said.
Employers are to use Form 1099-MISC for tax year 2019, the official said, noting that the form would still include two reporting dates. A draft release of the form was not determined, the official said.
A participant on the teleconference suggested that the IRS make inactive Box 7 of Form 1099-MISC to leave the numbering of the existing boxes intact. A redesign would require reprogramming for employers and software developers, the participant said.
Backup withholding reporting would be included on the 1099-NEC as well as the 1099-MISC, the official said.
“The reporting itself on the NEC is not new reporting,” the official said. “It’s simply moving from one form to the other. So the backup withholding, if it applied to Box 7, is also going to apply to the NEC.”
A copy of the 2019 Form 1099-MISC is to be furnished to recipients by Jan. 31, 2020. The form is to be filed with the IRS by Jan. 31, 2020, if payments are reported in Box 7. Otherwise, paper copies are to be filed by Feb. 28, 2020, and electronic copies are to be filed by March 31, 2020.