October 17, 2019
Iowa releases 2020 withholding tables and instructions; 2019 Forms W-2 deadline moved to February 15, 2020
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, 2020.
2019 was the first revision of the Iowa withholding tables and formulas since April 1, 2006.
Supplemental wage payments
The supplemental withholding rate remains at 6.0% for calendar year 2020, as per Iowa regulations.
A supplemental wage payment is the payment of a bonus, commission, overtime pay, or other special payment that is made in addition to the employee's regular wage payment in a payroll period. When such supplemental wages are paid, the amount of tax required to be withheld shall be determined using the current withholding tables or formulas.
If supplemental wages are paid at the same time as regular wages, the regular tables or formulas are used in determining the amount of tax to be withheld as if the total of the supplemental and regular wages were a single wage payment for the regular payroll period.
If supplemental wages are paid at any other time, the regular tables or formulas are used in determining the amount of tax to be withheld as if the supplemental wage were a single wage payment for the regular payroll period. When an employer makes a payment of supplemental wages to an employee and the employer withholds federal income tax on a flat-rate basis, pursuant to Treasury Regulation Section 31.3402(g)-1, state income tax shall be withheld from the supplemental wages at a rate of 6.0% without consideration for any withholding allowances or exemptions.
Legislation reduces income tax rates for 2019, conforms Iowa law to federal
Iowa tax reform legislation enacted earlier in 2019 (SF 2417) reduced state income tax rates across the board effective January 1, 2019 and generally conformed 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 was 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 2020, will continue to be used to determine state allowances and deductions.
A Department webpage provides information regarding the tax reform legislation.
Calendar year 2019 Forms W-2 due by February 15, 2020
The Iowa Department of Revenue has issued final regulations extending the deadline for filing the annual Forms VSP, Verified Summary of Payments Report, W-2 and 1099 with the Department from January 31 to February 15. The new deadline also applies to Forms W-2 and 1099 furnished to employees. (Iowa revised regulation 701 — 46.3(422).)
The change in regulation takes effect October 30, 2019, making the deadline for submitting calendar year 2019 Forms W-2 to the Department and employees February 15, 2020.
The revised regulation also provides that only Forms W-2 and 1099 that reflect Iowa state withholding need to be submitted to the Department.
For more information on why the Department chose to change the deadline, see EY Payroll Newsflash Vol. 20, #144, 9-18-2019.
Failure to comply with electronic filing requirement 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.
For more information on Iowa withholding taxes, see the Department's website.
EY Payroll News Flash