We Americans have had a rough couple of years, not to mention quite a bit on our collective plate of late, especially in the last year or so what with a presidential election and some other thing I’m totally forgetting right now. So it’s understandable if we aren’t that impressed with a new W-4 form. Which is exactly what an AICPA survey has found.
The IRS blessed taxpayers with a new Form W-4 back in late 2019, with the hope that the updated form would improve their inability to properly estimate withholding (a herculean task for civvies, obviously). Unfortunately, the IRS failed to properly gauge the enthusiasm of its target audience for improved tax forms, and only slightly more than a quarter of Americans have used the new form.
Worse, the AICPA survey showed that just less than half of American taxpayers even remember when they last updated their withholding. See above re: we’ve had other things going on.
For those taxpaying Americans (yes, even you) who might want to consider updating their employee withholding now that a new (and hopefully better) year is soon upon us might want to check out this article from our friends at Gusto on the basics. The expert the Journal of Accountancy spoke to for their article on survey results says taxpayers should consider updating their withholding forms so as not to continue giving the government an interest-free loan returned to them in the form of a refund. Alright, he didn’t say exactly that:
“A refund at tax time means that you’ve made an interest-free loan to the government, sacrificing earnings on the money that could have gone into your pocket during the year,” said Neal Stern, CPA, a member of the AICPA National CPA Financial Literacy Commission.
Instead, many taxpayers would be better off filing a new, more accurate Form W-4 resulting in larger paychecks, which can be used to invest or pay down high-interest debt, Stern said. He recommends using a free estimator tool from the IRS to ensure accuracy.
Or just continue drifting through life oblivious, that’s a plan too.