05 March 2020 IRS announces redesign of lock-in letters for income tax withholding The IRS announced on March 4 in Issue 2020-03 that employers will soon receive redesigned versions of its Withholding Compliance Lock-In Letters 2800C and 2808C (lock-in letters). As previously reported (Tax Alert 2020-0343), the IRS issued a series of frequently asked questions explaining that the Tax Cuts and Jobs Act of 2017 (TCJA) changed withholding calculations by eliminating personal allowances, requiring the IRS to redesign the Form W-4, Employee's Withholding Certificate. Accordingly, changes are necessary in the procedures that apply to lock-in letters. Withholding Compliance Lock-In Letters 2800C and 2808C are being redesigned to include the new lock-in rate instructions. Instead of providing the employer with the number of personal allowances by which withholding would be reduced, the letters will provide employers with the withholding status and withholding rate and any annual reductions to withholding or additional amount to withhold per pay period as a dollar value. The format shown below is what the withholding instructions will look like on the redesigned 2800C lock-in letter: Until the redesigned Letters 2800C and 2808C are cleared for publishing, the IRS Withholding Compliance Unit will continue to issue the Withholding Compliance Lock-in Letters using the old allowance withholding method and employers should follow the letters as directed. Employers that have already converted their payroll systems to the new 2020 withholding methods can input values to Step 4(a) and 4(b) for 2020 as follows: Step 4(a) — $12,900 for married filing joint or $8,600 for all others; and 4(b) — number of allowances, as specified in the letter, multiplied by $4,300.
Document ID: 2020-0499 | |||||||||
