The IRS Form W-4 is important for employers and employees, so any changes are always closely examined. While there are some minor changes for 2023, it is nothing like the 2020 long-awaited overhaul of the form that ushered in major revisions.
“In case you haven’t heard, the W-4, or Form W-4 has been updated for 2023. What does this mean for employers? Fortunately, not much has changed. And, the IRS is not requiring all employees to complete the revised form,” reports Paycor.
Where to Find 2023 From W-4 Changes
Paycor says that Form W-4 is an important part of the compliance landscape and is completed whenever an employee starts a new job or modifies their tax withholding status.
“The federal income tax is a pay-as-you-go tax: you must pay the tax as you earn or receive income during the year. Employees use Form W-4 to let their employer know the amount to withhold and pay for federal income taxes on each paycheck,” explains Paycor.
Patriot Software compared the 2023 Form W-4 with the 2022 Form W-4 and found: “So, what’s new with the 2023 W-4 form? Not a whole heck of a lot.”
The minor changes for 2023 Form W-4 are:
- The IRS removed references to their tax withholding estimator.
- There’s now additional text on Step 2(c) to clarify who should use the checkbox for two jobs.
- The amounts on the Deductions Worksheet are updated for 2023.
New Form W-4R and Updated Form W-4P Must Now Be Used
While there were just some minor tweaks for the IRS Form W-4 for 2023, there are major changes with the new Form W-4R (Withholding Certificate for nonperiodic Payments and Eligible Rollover Distributions) and updated Form W-4P (Withholding Certificate for Periodic Pension or Annuity Payments).
Ascensus says that Form W-4R, new in 2022, must be used starting in 2023 for any non-periodic distributions and that Form W-4P is now to be used only for periodic pension or annuity payments.
“The IRS has attempted to answer some of the outstanding questions regarding the use of the new forms,” reports Ascensus.
Ascensus summarizes the W-4R and W4-P IRS additional guidance as:
- Use of electronic substitutes to paper Forms W-4P and W-4R, the IRS references Publications 15-A, Employer’s Supplemental Tax Guide, and 15-T, Federal Income Tax Withholding Methods, for general guidelines but does provide a few clarifications:
o Payers that electronically store payee personal information and accept withholding elections through an account tied to the payee are not required to have the payee submit the information again when completing an electronic substitute to Forms W-4P and W-4R.
o References to page numbers, when not applicable to the substitute form, should be replaced by appropriate references.
o An electronic substitute to Form W-4R can provide a link to a web page containing marginal tax rate tables if certain text and instructions are provided.
Other guidance:
- When providing paper substitute forms for Forms W-4P and W-4R, payers should generally follow the same guidelines that apply to electronic substitutes, with the exception that the substitute form must include applicable instructions and worksheets rather than providing a web address.
- The IRS confirms that telephonic substitutes for Forms W-4P and W-4R are permitted and intends to issue additional guidance. In the meantime, brief scripting specific to three Form W-4R scenarios is provided, and the IRS specifies the Form W-4P content that should be scripted as well.
- The IRS clarifies that for payers using electronic or paper substitutes for Forms W-4P and W-4R, compliance with the updated forms must occur by the later of January 1, 2023, or 30 days after the IRS releases the final versions of the 2023 Forms W-4P and W-4R.
Questions Answered on IRS Form W-4R and Form W-4P
The Teacher Retirement System of Texas (TRS), like many employers, has implemented changes according to the changes in IRS Form W-4P and Form W-4R.
The TRS FAQ on the changes includes:
- How is the new federal income tax withholding form (Form W-4P) different from the prior TRS Federal Income Tax Withholding Certificate form (TRS 228A)? TRS’ prior federal income tax withholding form used an individual’s filing status (married or single) and the number of withholding allowances claimed. The new federal income tax withholding form added a new filing status, “head of household.” It also replaced the use of withholding allowances with new optional fields to report information such as other income, deductions, and tax credits.
- Do I need to complete a new form if I don't want to change my withholding preference? No, if you are currently receiving an annuity and do not wish to change your withholding preference, you are not required to submit a new tax withholding election form. If you decide to update your withholding preferences in the future, you will need to submit a new Form W-4P.
- If I do not complete a new form, will my federal income tax withholding amount stay the same? If you do not complete a new Form W-4P, we will continue to use the information you previously submitted on the TRS228A, including the same marital status, number of withholding allowances, and additional withholding amounts, if applicable.
The Utah Retirement Systems (URS) notes that the new Form 4-WP must be submitted for any changes after December 31, 2022.
“Don’t be surprised that the new Form W-4P looks very different. It asks for more information than previous versions, and federal withholding is calculated differently,” says URS.
URS notes that the major Form 4-WP changes include:
- The default withholding rate changed from married claiming three dependents to single claiming no adjustments.
- Personal allowances are no longer used.
- A new head of household status.
- Separate sections for including income from other jobs or pensions (including spouse income), claiming tax credits and deductions, and choosing additional amounts to withhold.