The IRS has issued a preliminary draft of the 2026 Form W-4, Employee’s Withholding Certificate, reflecting updates prompted by the One Big Beautiful Bill Act (OBBBA). This early release is intended solely for informational purposes and is not yet finalized for official use.
What is Form W-4?
Form W-4 is used by employees to inform their employer of the appropriate amount of federal income tax to withhold from each paycheck. This ensures that the correct amount is remitted to the IRS throughout the year, helping employees avoid underpayment penalties or unexpected tax bills at year-end.
Key Updates Driven by OBBBA
The IRS posted a draft of the 2026 form W-4, and while it is not final or for filing, it shows where the agency is headed. The form extends to five pages and includes four changes, noted below.
- Claim Dependent and Other Credits: The lines in Step 3 are now labeled Lines (a) and (b) and require the same information as in the 2025 form. The amount for the child tax credit is blanked out, which is increased by the OBBBA to $2,200 from $2,000 per qualifying child.
- Other Adjustments: Step 4 of the form no longer includes “Optional.” Step 4(b) informs employees that if the employee skips this line, withholding will be based on the standard deduction.
- Deductions Worksheet: The worksheet for Step 4(b) now has 15 lines and is on its own page. Among the new lines are ones to account for the “no tax on overtime” and “no tax on tips” provisions.
- Exempt checkbox: A checkbox was added after Step 4 for employees to claim they are exempt from withholding. On the previous version, employees claimed exempt by writing “Exempt” in the space below Step 4(c).
How We Can Help
The OBBBA contains many provisions that will affect payroll for years to come. We stay up to date, so you don’t have to. Our team specializes in translating complex withholding updates into clear, actionable steps—so you can ensure every W-4 is filled out correctly and every payroll cycle runs without a hitch. Let us handle the details, so you stay ahead of the curve. Contact us today.
