The Iowa Department of Revenue has released revised income tax withholding tables/formulas and instructions to its website. The revisions take effect with wages paid on and after January 1, 2019. This is the first revision of the Iowa withholding tables and formulas since April 1, 2006.

The supplemental withholding rate remains at 6.0% for calendar year 2019, as per Iowa regulations.

According to the Department, for the Iowa withholding tables, federal withholding amounts are estimated using a few assumptions such as a status of married filing joint. It was necessary for the Department to estimate federal 2019 withholding parameters (brackets, rates, and the amount for each allowance) because the IRS had not released those parameters when the revised tables were prepared. Employers are cautioned that these assumptions may result in less accurate Iowa withholding than if the alternative Iowa withholding formula is used.

Legislation reduces income tax rates for 2019, conforms Iowa law to federal

Iowa tax reform legislation enacted earlier this year (SF 2417) reduces state income tax rates across the board effective January 1, 2019 and generally conforms Iowa's individual income tax laws to the federal Internal Revenue Code (IRC), including changes under the Tax Cuts and Jobs Act (TCJA), beginning with tax year 2019. Rolling conformity with the IRC, rather than a fixed conformity date, begins in 2020. With rolling conformity, the IRC is automatically adopted without any action needed by the Iowa state legislature.

The maximum withholding tax rate is reduced from 8.98% to 8.53% beginning tax year 2019. SF 2417 also provides for future reductions in the individual income tax rates and the number of tax brackets starting in tax years beginning on or after January 1, 2023 if certain economic targets are met.

Form IA-W-4, Employee's Withholding Certificate, which has not yet been released for 2019, will continue to be used to determine state allowances and deductions.

A Department webpage provides information regarding the tax reform legislation.

Calendar year 2018 Forms W-2 due by January 31, 2019

As we previously reported, all employers are required to electronically file calendar year 2018 Forms W-2 electronically by January 31, 2019. For calendar years 2016–2017, employers with fewer than 50 employees were exempt from filing Forms W-2 with the Department. (EY Payroll Newsflash Vol. 18, #204, 12-6-2017.)

For calendar years 1999 through 2015, employers were not required to submit Forms W-2 with their Verified Summary of Payment (VSP) reconciliation forms to the Department. Employers were only required to submit Forms W-2 within three years upon a request from the Department.

For more information, see the Department's website.

Filing of Forms 1099/W-2G are also required for calendar year 2018

Beginning with calendar year 2018, all payers issuing Forms 1099 and W-2G are required to submit these forms to the Department by January 31, 2019. This was a one-year delay from the original requirement that these forms be filed for calendar year 2017.

Failure to comply may result in penalties

Failure to electronically file Forms W-2 (and 1099/W-2G) if required may result in the assessment of penalties unless the employer requests, in writing, a hardship extension of the requirement to file electronically. Upon approval, the Department would extend the electronic filing requirement to the 2020 tax year.

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EY Payroll News Flash