US IRS Income Tax Withholding

On Feb. 13, US IRS proposed income tax withholding regulations.

  • Proposed Internal Revenue Service regulations provide guidance for employers concerning the amount of federal income tax to withhold from employee's wages.
  • IRS updated employment tax regulations under 26 CFR 31 as to 26 USC 3401 and 3402 to conform to the changes made by Tax Cuts and Jobs Act (TCJA).
  • Accommodate redesigned 2020 Form W-4 employee's withholding certificate and related wage withholding tables and computational procedures established by the IRS.
  • Proposal Purpose
  • Revised regulations implemented by the recent IRC changes made by the TCJA.
  • Proposed rules reflected redesigned 2020 Form W-4 and related IRS publications.
  • Proposed regulations affect employers that pay wages subject to federal income tax withholding, employees who receive wages subject to federal income tax withholding.
  • Proposed Regulations
  • Clarified that, relating to the collection of income tax at source, any reference to withholding exemption certificates also means withholding allowance certificates.
  • Rules clarified employers that use percentage method of withholding must compute tax amount to be withheld based on entry for anticipated filing status, marital status.
  • On employee's Form W-4 using applicable percentage method tables, computational procedures in applicable forms, guidance for period in which wages are paid.
  • Employers using wage bracket method withholding tables for daily, miscellaneous pay period must use wage bracket withholding tables for employee's filing, marital status.
  • Provided that employee who fails to furnish valid Form W-4 must be treated as single.
  • Changed current regulations that employee's anticipated filing status on employee's income tax return does not determine if employee indicate married on Form W-4.
  • In defining married, in addition to employee marital status, tax amount withheld also determined by reference to employee anticipated filing status on income tax return.
  • May only select married filing jointly on form if reasonably expects to file jointly single return of income, is lawfully married for federal tax purposes, treated as married.
  • Similar to current regulations, employee is entitled to withholding allowance only if employee furnishes a valid Form W-4 claiming withholding allowance.
  • Employer not required to ascertain whether the withholding allowance the employee claims is greater than the allowance to which the employee is entitled.
  • Effectiveness
  • Written comments and public hearing requests must be received by Apr. 13, 2020.
  • Except for removal of S 31.3402(h)(4)-1(b), proposed regulations provide that taxpayers may choose to apply the rules on or after Jan. 1, 2020.

Regulators US IRS
Entity Types Auditor; Corp
Reference 85 FR 8344, 2/13/2020; RIN 1545-B032; 26 CFR 31; Tax Cuts and Jobs Act; 26 USC 3401; 26 USC 3402; Form W-4
Functions Accounting; HR; Legal; Operations; Reporting; Tax
Countries United States of America
Products Corporate; Payments
Regions Am
Rule Type Proposed
Rule Date 2/13/2020
Effective Date 4/13/2020
Rule Id 71876
Linked to N/A
Reg. Last Update 2/13/2020
Report Section US Banking

Last substantive update on 02/14/2020