Proposed regs implement TCJA withholding changes

Tax Hot Topics newsletter The IRS issued proposed regulations (REG-132741-17) on Feb. 13 to provide preliminary guidance for employers on the amount of federal income tax to withhold from employee wages.

The proposed regulations would implement the recent changes made by the Tax Cuts and Jobs Act (TCJA), most notably the elimination of withholding exemptions in favor of a new withholding allowance based on, among other factors, filing status, the standard deduction and withholding adjustments. The proposed guidance is also meant to reflect the redesigned 2020 Form W-4 and related wage withholding tables and computational procedures established by the IRS.

Employees who have submitted a Form W-4 to their employers in years prior to 2020 generally would not have to complete a new Form W-4. However, employers would have to treat new employees hired in 2020 who fail to furnish a properly completed Form W-4 as single for withholding purposes and withhold using the standard deduction with no other adjustments. The proposed rules would also provide clarification on electing the proper marital status in order for employees to more accurately determine their withholding amounts. Further, employees would be able to determine additional withholding allowances or reductions based on their estimated tax deductions, credits and payments. The proposed regulations would also provide administrative guidance on when a Form W-4 must be furnished to an employer as well as clarifications on information reporting requirements.

The regulations are proposed to generally be applicable when they are finalized, but also include a number of proposed special applicability date provisions. However, taxpayers may rely on the proposed rules until final regulations are published.

Jeff Martin
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
T +1 202 861 4107

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