IRS Publication 15-A: Employer’s Supplemental Tax Guide

In its third filing season since the COVID-19 pandemic began, the Internal Revenue Service prioritized processing its backlog of tax returns but its current inventory of unprocessed returns remains high. At the end of 2021, IRS had a backlog of about 10.5 million paper returns and returns stopped for errors. As shown in the figure, IRS addressed its backlog of 2021 paper returns. However, as of late September 2022, IRS had about 12.4 million returns to process, resulting in refund delays for millions of taxpayers. GAO previously recommended that IRS improve paper processing by digitizing more paper returns and addressing barriers to e-filing. During the 2022 filing season, IRS focused on reducing its correspondence backlog, which left most phone calls from taxpayers unanswered.

Remember, if an employee gives you a revised Form W-4, you have limited time to implement the changes. IRS says you must put the changes into effect by the start of that pay period. In this situation, the employee didn’t request extra withholding.

IMPORTANT NOTICE: IRS HAS REVISED FORM W-4 EFFECTIVE JANUARY 1, 2020

The computational bridge involves “converting” 2019 and earlier Forms W-4 into 2020 and later Forms W-4. Due to the Tax Cuts and Jobs Act, the Internal Revenue Service released a revised federal Form W-4 for tax year 2020.

If you use online payroll software, the information automatically updates. Publication 15-T also provides the amounts employers should add to the wages paid to nonresident alien employees working in the United States when figuring their income tax withholding. If the nonresident alien employee has submitted a Form W-4 for 2020 or later or was first paid wages in 2020 or later, add the amount shown in Table 2 to their wages for calculating federal income tax withholding. If the nonresident alien employee was first paid wages before 2020 and has not submitted a Form W-4 for 2020 or later, add the amount shown in Table 1 to their wages for calculating federal income tax withholding. An employee must follow the instructions to the Form W-4, and other IRS forms, instructions, publications, and related guidance in determining the employee’s withholding allowance or other reductions in withholding permitted under section 3402 for deductions, credits, or estimated tax payments described in paragraphs , , and of this section. The removal of paragraph from this section as of October 6, 2020, which provided for combined FICA and income tax withholding tables, applies on and after January 1, 2020.

Figure the tentative withholding amount

However, the employee must furnish a new withholding allowance certificate to take effect the following calendar year by the later of December 1 of the calendar year in which the employee’s filing status changes, or within 10 days of such change. Generally, employers apply the withholding tables or computational procedures based on the entries on the Form W-4 the employee furnishes the employer. An employee who receives wages subject to withholding under section 3402 is required to furnish his or her employer a Form W-4 on commencement of employment or, generally, within 10 days after the employee experiences a “change of status” that reduces the “withholding allowance” to which the employee is entitled. When computing federal income tax withholding using the percentage method for automated payroll systems for employees who have not submitted a Form W-4 for 2020, the adjusted annual wage amount continues to consider personal allowances. For 2020, multiply each personal allowance claimed on the employee’s Form W-4 by $4,300. For 2020, income withholding methods are to be included in Publication 15-T, Federal Income Tax Withholding Methods, which is to be released by Dec. 31. Draft withholding tables and worksheets using inflation-adjusted amounts for 2020 were issued Nov. 28 as an attachment to the Nov. 4 draft of Publication 15-T. Additionally, Publication 15-T is to include data regarding the amount to add to a nonresident alien employee’s wages for calculating federal income tax withholding.

• Publication 15-T also provides the amounts employers should add to the wages paid to nonresident alien employees working in the United States when figuring their income tax withholding.
• This information is not part of the official Federal Register document.
• The publication was revised to include a new worksheet for withholding from periodic pension or annuity payments and withholding tables that generally were indexed for inflation for 2022.
• This draft has been released to provide employers with the computation of withholding to be made under the Percentage Method and Wage Bracket Method tables using both the new 2020 Form W-4 and the Forms W-4 from before 2020.
• The Form W-4P and the Form W-4 differ on the withholding approach where there are multiple sources of withholding (e.g., multiple pensions, or a job and an annuity).

This site displays a prototype of a “Web 2.0” Irs Releases 2020 Publication 15, 15 of the daily Federal Register. It is not an official legal edition of the Federal Register, and does not replace the official print version or the official electronic version on GPO’s govinfo.gov. The President of the United States communicates information on holidays, commemorations, special observances, trade, and policy through Proclamations. The Public Inspection pageon FederalRegister.gov offers a preview of documents scheduled to appear in the next day’s Federal Register issue. The Public Inspection page may also include documents scheduled for later issues, at the request of the issuing agency.

Federal Taxes

While every effort has been made to ensure that the material on FederalRegister.gov is accurately displayed, consistent with the official SGML-based PDF version on govinfo.gov, those relying on it for legal research should verify their results against an official edition of the Federal Register. Until the ACFR grants it official status, the XML rendition of the daily Federal Register on FederalRegister.gov does not provide legal notice to the public or judicial notice to the courts. To use the new federal withholding tax table that corresponds with the new Form W-4, first find the employee’s adjusted wage amount.

Therefore, the system programming for Form W-4 may not always be compatible. Near the end of a year, an employee may furnish the Form W-4 revision for the following calendar year to take effect for the following calendar year. The determinable additional amounts (as defined in paragraph of this section) for each item for the estimation year. In using the Tax Withholding Estimator or Publication 505 , the employee includes all items of nonwage income the Tax Withholding Estimator or Publication 505 prompts or instructs the employee to enter or include.

This will allow https://intuit-payroll.org/s to use one process for both 2019 and earlier Forms W-4 and 2020 and later Forms W-4 and free employers from the need to use the number of allowances data field from 2019 and earlier Forms W-4 once the employers apply the appropriate computational bridge entries for their employees. Accordingly, starting for calendar year 2021, the IRS intends to include instructions in Publication 15-T for these optional computational bridge entries.

• Addressing GAO’s prior recommendation to modernize its online “Where’s My Refund” application will help IRS better serve taxpayers and reduce the burden of additional calls and letters on IRS staff.
• See how we help organizations like yours with a wider range of payroll and HR options than any other provider.
• Try our payroll software in a free, no-obligation 30-day trial.
• The percentage method works in all situations, regardless of wages or allowances (if using a 2019 or earlier W-4).
• The publication notes that the IRS has a new form for reporting nonemployee compensation.
• This feature, originally released in tax year 2021, is completely optional.

The commenter’s suggestions regarding the contents of the lock-in letters or modifications notices do not require changes to the proposed regulations because the language of the proposed regulations is broad enough to accommodate the commenter’s suggestions to the letters and notices. Accordingly, the proposed regulations regarding the contents of the lock-in letter or modification notice will be adopted as final without change. However, these comments will be considered in future revisions of the lock-in letter and modification notice. To facilitate the use of the computational bridge entries, starting in 2021, the IRS will no longer index the withholding allowance to reflect cost-of-living adjustments to what would have been the value of a personal or dependency exemption in section 151 prior to enactment of TCJA. Thus, employers that choose to implement the computational bridge entries starting in 2021 will not have to make any adjustments to employees’ withholding entries that the employee is treated as having made on the redesigned Form W-4 within their system unless the employee furnishes a new, redesigned Form W-4. In particular, the employer would treat the employee as having entered the value of two allowances corresponding to a single employee’s filing status and the value of three allowances corresponding to a married employee’s filing status in Step 4 of the redesigned Form W-4. In certain cases, the IRS may issue an employer a lock-in letter that notifies the employer in writing that an employee is not entitled to claim exemption from withholding or is not entitled to the withholding allowance claimed on the employee’s Form W-4 and prescribes the withholding allowance the employer must use to figure withholding.