News & Resources

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IRS Issues Final Rules for Federal Income Tax Withholding

BY: Jyme Mariani, Esq. | 10/09/20

The IRS issued final regulations to update the federal income tax withholding rules and reflect changes made by the Tax Cuts and Jobs Act (TCJA) and other legislation enacted since the rules were last revised [85 F.R. 63019, 10-6-20]. The final regulations adopted the proposed regulations (85 F.R. 8344, 2-13-20) with a few changes.

The final regulations amend the Employment Tax Regulations (26 C.F.R. part 31) under IRC §§3401 and 3402. The IRS issued the regulations to implement the TCJA’s tax law changes and to reflect the redesigned 2020 Form W-4, Employee’s Withholding Certificate.

Optional Computational Bridge Entries

The final regulations adopt optional computational bridge entries to allow employers to continue in effect 2019 or earlier Forms W-4 as if the employees had furnished redesigned Forms W-4. The bridge entries are optional, and the IRS will continue publishing withholding tables and procedures for employers that choose to continue computing withholding using the computational procedures related to 2019 or earlier Forms W-4.

Starting for calendar year 2021, the IRS said it intends to include instructions in Publication 15-T, Federal Income Tax Withholding Methods, for the bridge entries. The bridge entries will allow employers to use the computational procedures and data fields for the redesigned Form W-4 to arrive at the equivalent withholding for an employee that would have applied using the computational procedures and data fields related to a 2019 or earlier Form W-4 furnished by the employee.

APA Webinar Will Explain the Changes

On October 14, APA will present the webinar Payroll in 2020 – Developments Through the 3rd Quarter. This webinar will update attendees on the latest IRS guidance, including the rule changes, a brief overview of the revised Form 941 for the third quarter of 2020, and an in-depth discussion on how to make corrections using the recently revised Form 941-X.

More information on the webinar and registration is available. The presentation will also be offered as a webinar on demand beginning on October 28.

To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!


Jyme Mariani, Esq., is Managing Editor of Payroll Currently and Payroll Information Resources for the APA.