New Form W-4 slow to gain traction with taxpayers

By Megan Hart

In 2019, following the passage of the law known as the Tax Cuts and Jobs Act, P.L. 115-97, the IRS rolled out major changes to Form W-4, Employee’s Withholding Certificate. And while the updated Form W-4 is designed to help taxpayers more accurately estimate their withholding, so far, few Americans have used it.

That’s according to a survey from the AICPA, which shows just over a quarter (26%) of American taxpayers have updated their Form W-4 since the new version was released in December 2019. It also showed 45% of taxpayers don’t know when they last updated their withholding. The survey, conducted in October 2020 by Harris Poll on behalf of the AICPA, polled 1,636 Americans who filed income taxes within the past three years.

Completing the new form could help Americans ensure their withholding is more accurate and potentially prevent them from receiving a larger tax bill or refund than expected.

“Since the new W-4 form is designed to help closely match your withholding to your tax liability based on current rules, it provides simplified steps to account for dependents, multiple jobs, and other items that can affect the amount you owe,” said Neal Stern, CPA, a member of the AICPA National CPA Financial Literacy Commission.

The redesigned form looks quite different from the old version, which primarily focused on the number of taxpayers included in the return, Stern said. While there’s no limit to how frequently Americans can update their withholding, there are times when it’s especially important, he said.

“It pays to update your W-4 whenever there are changes in your situation that can affect your tax liability, such as the birth or adoption of a child, marriage or divorce, or a spouse starting a job during the year,” he said.

It’s also important for couples who file a joint tax return to coordinate their Forms W-4 to ensure deductions and credits aren’t double-counted, Stern said. If an employer withholds too little throughout the year due to an inaccurate W-4, it can lead to a surprisingly large tax bill or even penalties.

Nineteen percent of American taxpayers said they’ve received an unusually large tax bill in the last three years, according to the AICPA survey. The majority of those (77%) who got such a large bill said it came as a surprise, with almost 40% saying they were extremely or very surprised.

Eleven percent of taxpayers said they had received an unusually large refund. More than three-quarters of those who got a large refund (76%) said they were surprised by it, with 43% describing themselves as extremely or very surprised.

Forty percent of survey respondents said they prefer to overpay throughout the year in order to receive a bigger refund. But a large refund isn’t always good news, Stern said.

“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,” he said.

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.

The survey also showed Americans might not understand tax forms as well as they think. While about two-thirds (63%) of taxpayers said they were very or somewhat familiar with Form W-4, only 11% correctly answered all six questions about it during a quiz.

Megan Hart is a freelance writer based in Wisconsin. To comment on this article or to suggest an idea for another article, contact Courtney Vien, a JofA senior editor, at

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