The IRS recently issued final regulations (T.D. 9924
) implementing changes made by the Tax Cuts and Jobs Act to the rules for withholding income tax from employee wages. The final regulations adopt proposed regulations issued in February but make some changes in response to comments from taxpayers (for more details on the proposed regulations, see our story “Proposed regs implement TCJA withholding changes
Most notably, the final regulations allow employers to use computational bridge entries to adjust computational procedures and data fields on an employee’s 2019 or older Form W-4 to arrive at the equivalent withholding under the redesigned Form W-4. The use of computation bridge entries is optional and was provided in response to concerns that not requiring all employees to furnish redesigned Forms W-4 would result in administrative burdens and inaccurate withholding. The IRS indicated the four adjustments necessary to implement the computational bridge entries will be provided in Publication 15-T.
The final regulations also address taxpayer concerns about whether a lock-in letter based on 2019 or earlier-year Form W4 computational procedures ceases to be effective because of the redesign of Form W-4. The final regulations follow the proposed regulations and provide that the redesign of Form W-4 alone does not require the IRS to reissue lock-in letters or modification notices. Employers must continue following any lock-in letter or modification notice until the IRS releases the employee from the program or unless the employee furnishes a Form W-4 that results in more withholding than under the lock-in letter or modification notice.
The final regulations are generally applicable as of Oct. 6, 2020 (except for several earlier applicability dates specified in the proposed regulations), but taxpayers may choose to apply most of them on and after Jan. 1, 2020.
Washington National Tax Office
+1 202 521 1526
Washington National Tax Office
+1 202 521 1554
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.