IRS issues draft 2021 withholding tables
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Monday, November 30, 2020

IRS issues draft 2021 withholding tables

By Payroll and Entitlements Editorial Staff

The IRS has issued draft 2021 wage-bracket and percentage method withholding tables, effective for wages paid on and after January 1, 2020. All of the tables will be reproduced in the Payroll Management Guide beginning at ¶11 and ¶28 in a future release.

How to treat 2019 and earlier Forms W-4 as if they were 2020 or later Forms W-4. Employers may use an optional computational bridge to treat 2019 or earlier Forms W-4 as if they were 2020 or later Forms W-4 for purposes of figuring federal income tax withholding. The computational bridge allows employers to use computational procedures and data fields for a 2020 and later Form W-4 to arrive at the equivalent withholding for an employee that would have applied using the computational procedures and data fields on a 2019 or earlier Form W-4. You must make up to four adjustments to use this computational bridge.

  1. Select the filing status in step 1(c) of a 2020 or later Form W-4 that most accurately reflects the employee’s marital status on line 3 of a 2019 or earlier Form W-4. Treat the employee as “Single or Married filing separately” on a 2020 or later Form W-4 if the employee selected either “Single” or “Married, but withhold at higher single rate” as their marital status on their 2019 or earlier Form W-4. Treat the employee as “Married filing jointly” on a 2020 or later Form W-4 if the employee selected “Married” as their marital status on their 2019 or earlier Form W-4. Employers cannot convert an employee to a filing status of “head of house-hold” using this computational bridge.
  2. Enter an amount in step 4(a) on a 2020 or later Form W-4 based on the filing status that you determined in (1) above when you converted the employee’s marital status on a 2019 or earlier Form W-4. Enter $8,600 if the employee’s filing status is “Single or Married filing separately” or $12,900 if the employee’s filing status is “Married filing jointly.”
  3. Multiply the number of allowances claimed on line 5 of an employee’s 2019 or earlier Form W-4 by $4,300 and enter the result in step 4(b) on a 2020 or later Form W-4.
  4. Enter the additional amount of withholding requested by the employee on line 6 of their 2019 or earlier Form W-4 in step 4(c) of a 2020 or later Form W-4.

This computational bridge applies only for Forms W-4 that were in effect on or before December 31, 2019, and that continue in effect because an employee didn’t submit a 2020 or later Form W-4. If an employee is either required, or chooses, to submit a new Form W-4, it doesn’t change the requirement that the employee must use the current year’s revision of Form W-4. Upon putting in effect a new Form W-4 from an employee, employers must stop using this computational bridge for the applicable year of the new Form W-4. An employer using the computational bridge for a Form W-4 furnished by an employee must retain the Form W-4 for its records.

Supplemental wage rate. The supplemental wage rate will remain 22%.

Standard deductions. The standard deductions for those who use them are $8,600 if the employee’s filing status is “Single or Married filing separately” or $12,900 if the employee’s filing status is “Married filing jointly.

Exemption amount. The exemption amount for thoise who use it remaines $4,300.

Nonresident withholding. Nonresident Aliens should see IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens, before completing Form W-4.

2021 Step 1. Determine if the nonresident alien employee has submitted a Form W-4 for 2020 or later or an earlier Form W-4. Then add to the wages paid to the nonresident alien employee for the payroll period the amount for the applicable type of Form W-4 and payroll period.

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.

  • Weekly—$155.80
  • Biweekly—$311.50
  • Semimonthly—337.50
  • Monthly—$675.00
  • Quarterly—2,025.00
  • Semiannually—$4,050.00
  • Annually—$8,100.00
  • Daily or Miscellaneous—$31.20

2021 Step 2. 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.

  • Weekly—$238.50
  • Biweekly—$476.90
  • Semimonthly—516.70
  • Monthly—$1,033.30
  • Quarterly—3,100.00
  • Semiannually—$6,200.00
  • Annually—$12,400.00
  • Daily or Miscellaneous—$47.70

((Draft) IRS Publication 15-T, Federal Income Tax Withholding Methods, for Use in 2021).

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