October 10, 2022
District of Columbia withholding instructions and tables do not currently reflect tax increases that were effective January 1, 2022
The District of Columbia's Office of Tax and Revenue (OTR) has clarified through discussions that although FR-230, Income Tax Withholding Instructions and Tables was last updated in 2018, employers are responsible for withholding income tax according to the changes effective January 1, 2022 under Act 24-0176 (The Income Tax Fairness Amendment Act of 2021, p. 211). The Act increased the top tax rate from 8.95% to 10.75% on income over $1 million and adjusted the wage brackets. The OTR confirmed that it has not yet updated FR-230 to reflect changes under the Act but employers, nonetheless, will be liable for any underwithholding that is the result of using the most current FR-230 (rev. 2018) on its website. (Telephone conversation, OTR, 10-6-2022.)
Businesses should note that the change in the highest tax rate also applies to withholdings on lump-sum pension distributions, which, effective January 1, 2022, are subject to a tax rate of 10.75% rather than 8.95%. (OTR Tax Notice 2012-02.)
On September 27, 2021, D.C. Mayor Muriel Browser signed into law Act 24-0176, which included a measure that, effective January 1, 2022, raised the top income tax rate from 9.75% to 10.75% on income over $1 million and adjusted the wage brackets such that tax increases apply to individuals earning more than $250,000.
On September 2, 2022, the OTR issued a notice on its website that includes the tax rate schedule that applies for tax year 2022. The 2022 tax rate schedule was also posted to the OTR's Individual and Fiduciary Income Tax page; however, as previously mentioned, as of the date of this Alert, the withholding instructions and tables were last updated in 2018.
On the following page is a comparison of the tax rate schedules contained in the 2018 FR-230 and the tax rate schedule that applies effective January 1, 2022 under Act 24-0176.
District of Columbia tax rates effective January 1, 2022
District of Columbia tax rates in the 2018 revision of FR-230 (effective 2016—2021)
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