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May 30, 2024

Iowa Department of Revenue revises income tax withholding instructions

Due to changes in Iowa tax law (see Tax Alert 2022-0545), the Iowa Department of Revenue (DOR) instructed employers to encourage their employees to provide an updated 2024 IA W-4, Employee Withholding Allowance Certificate.

For employees who have not submitted a 2024 IA W-4, the DOR instructed employers to use $40 as the total allowance amount and $0 additional withholding when computing Iowa income tax withholding for wages paid in calendar year 2024.

The DOR has updated its guidance pursuant to employees who do not provide a 2024 IA W-4 as follows:

  • If an employer expects to receive, but has not yet received, a 2024 IA W-4, it may temporarily use $40 as the total allowance amount and $0 as the additional withholding amount when calculating Iowa income tax withholding.
  • If an employee has furnished an IA W-4 in any year before 2024, but did not provide a 2024 IA W-4, the employer may continue to compute Iowa income tax withholding using the most recently furnished IA W-4 with the following modification:

Multiply the number of allowances claimed on line 6 of the pre-2024 IA W-4 by $40 to determine the total amount of allowances. For example, if an employee claims six total allowances on a 2023 IA W-4, when calculating the 2024 Iowa withholding the employer should use $240 (6 x $40) for total allowances.

Ernst & Young LLP insights

Employers should be on the lookout for further changes in Iowa’s income tax withholding instructions for tax year 2025 when SF 2442 collapses the personal income tax brackets from three to a single tax rate of 3.8% (see Tax Alert 2024-0932).

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Contact Information

For additional information concerning this Alert, please contact:

Workforce Tax Services - Employment Tax Advisory Services

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor