IRS on employer tax withholding responsibilities
The IRS has announced a series of changes to the tax law that will impact employers who withhold taxes from employees’ paychecks. According to Internal Revenue Service, these new guidelines are designed to “protect employees from seeing large, unexpected tax bills.”
The employer did not withold federal taxes, interest or penalty on the under-withheld amount. IRS will accept an employer’s reasonable faith estimate of federal income tax to be withheld if the amount withheld is less than the amount determined by the above methods and will not be held liable for any interest or penalties on the under-withheld amounts. The IRS has a worksheet that can be used for purposes of automatically calculating withholding allowances for nonsalaried (hourly) employees.
All employers need to understand their obligations under the new guidelines, especially those that fall under “large payrolls,” which include firms with more than $50 million in gross receipts. The IRS says changes in withholding rates will be reflected on paychecks starting next month. According to the IRS, employers should also update withholding tables and check worker W-4 allowances for any necessary updates or changes.
The agency’s new guidelines are designed to ensure that taxpayers only pay taxes they have to based on their incomes. The IRS wants all workers to take advantage of more flexibility in withholding allowances. The agency has made it easier for employees to determine any changes necessary to their W-4 tax forms.
The IRS says employers should continue withholding income taxes from employee paychecks based on previously released withholding tables despite the changes. According to the IRS, employers who use information returns like Forms 1099 and W-2 will also need to continue filing these forms as in previous years. According to the agency, employers who do not use information returns should continue filing them just as they have before.
More employers than ever are going through the payroll process digitally. Payroll is an area of the business that can benefit the most from a digital environment, saving labor costs and providing clients with updated, more accurate information faster. The IRS’ latest announcement will only help these efforts by making comprehensive reporting easier. Employers need to understand how this new system will affect them and how they will be affected by it.
Additionally, employers should know how the IRS’ new withholding tables will impact their employees’ paychecks. Some workers may see a reduction in the amount they receive each payday, while others will see an increase. It all depends on the information on their W-4 forms, which employers must now update to reflect any necessary changes to their payroll agreements with individual workers. Employers need only compute each employee’s new paycheck based on a worker’s W-4 form and instructions from the IRS.
Withholding Shield is an alternative payroll tax solution that helps employers meet their legal and financial responsibilities for federal income tax withholding.
