Proposed regulations in the U.S. implement changes made by the 2017 Tax Cuts and Jobs Act to the federal income tax withholding rules. They are designed to accommodate the redesigned 2020 Form W-4 and related wage withholding tables and computational procedures. This report also covers two new online tools.
The U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) recently issued proposed regulations updating the federal income tax withholding rules to reflect changes made by the 2017 tax law commonly referred to as the “Tax Cuts and Jobs Act” (TCJA) and other legislation.1
The preamble to the proposed regulations further states that these regulations are designed to accommodate the redesigned 2020 Form W-4, Employee’s Withholding Certificate, and related wage withholding tables and computational procedures established by the IRS and reflected in Publication 15-T, Federal Income Tax Withholding Methods.
In an effort to help employers and employees transition to the redesigned withholding system, the IRS recently launched two new online tools: the Income Tax Withholding Assistant for Employers and an updated Tax Withholding Estimator.
Prior to the TCJA, withholding allowances were tied to an employee’s personal exemptions. The TCJA suspended personal exemptions, necessitating a redesign of the wage withholding system. Assignees are encouraged to review their withholding using the Tax Withholding Estimator to see if they need to file a revised Form W-4.
The proposed regulations implement changes made by the TCJA.2 Accordingly, the regulations proposed changes to the existing regulations and in general would update those regulations to conform to the changes made by the TCJA and other legislation enacted since the regulations were last revised.
The preamble to the proposed regulations further states that these regulations are designed to accommodate the redesigned 2020 Form W-4 and related wage withholding tables and computational procedures established by the IRS and reflected in Publication 15-T.
According to a related IRS release,3 the proposed regulations do not require employees to furnish a new Form W-4 solely because of the redesigned Form W-4. The IRS release further explains:
The proposed regulations were published in the Federal Register on February 13, 2020. Comments and requests for a public hearing are due by April 13, 2020.
The IRS recently revised Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens. The Notice provides special instructions when completing Form W-4 for compensation paid to nonresident employees performing dependent personal services in the United States. For 2020, nonresident alien individuals are advised to review and apply Notice 1392 to determine how to complete the 2020 Form W–4. The Notice modifies the instructions to Form W-4 to take into account the restriction on a nonresident alien’s filing status, the restriction on claiming the standard deduction, and the restriction on claiming certain tax credits and deductions for certain nonresident aliens.
According to the IRS, the “Income Tax Withholding Assistant“ is a spreadsheet-based tool designed to help employers, especially small businesses, easily transition to the redesigned withholding system.” The new Tax Withholding Estimator incorporates the changes from the redesigned Form W-4. Employees can fill out the Form W-4 from the Tax Withholding Estimator and give it to their employers.
The above information is not intended to be "written advice concerning one or more Federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 as the content of this document is issued for general informational purposes only.
The information contained in this newsletter was submitted by the KPMG International member firm in United States.
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