IRS releases income tax withholding tables for 2023

IRS has finalized the withholding tables Payroll will need in 2023. Whether you have old or new Forms W-4 on file for employees, you can get ready for next year.

As you know, IRS did a major overhaul of the W-4 in 2020. While some employees haven’t turned in new forms since then, the 2023 withholding tables account for that.

All the information is laid out in Publication 15-T, Federal Income Tax Withholding, where you’ll find seven withholding methods:

They are:

1. Percentage Method Tables for Automated Payroll Systems and Withholding on Periodic Payments of Pensions and Annuities
2. Wage Bracket Method Tables for Manual Payroll Systems With Forms W-4 From 2020 or Later
3. Wage Bracket Method Tables for Manual Payroll Systems With Forms W-4 From 2019 or Earlier
4. Percentage Method Tables for Manual Payroll Systems With Forms W-4 From 2020 or Later
5. Percentage Method Tables for Manual Payroll Systems With Forms W-4 From 2019 or Earlier
6. Alternative Methods for Figuring Withholding, and
7. Tables for Withholding on Distributions of Indian Gaming Profits to Tribal Members.

The publication also presents a recap of how Form W-4P and Form W-4R have changed and what’s required for 2023.

New Form W-4 for withholding

In addition to Publication 15-T, IRS has updated Form W-4 for 2023.

You won’t notice any big changes to Form W-4. However, all references to the tax withholding estimator found at www.irs.gov/W4App have been removed from the form and its instructions.

Heads up: IRS issued an information release on December 6, 2022, aiming to help taxpayers avoid surprises when they file their TY 2022 income tax returns. It’s possible that Payroll will notice an uptick in revised Forms W-4 from employees, once they become more aware of the changes.

For example:

• Some tax credits, including the child tax credit, have returned to 2019 levels.
• The $600 above-the-line charitable deduction is no longer an option for TY 2022.
• The temporarily expanded eligibility for the premium tax credit is still available for some taxpayers in TY 2022.

Remember, if an employee gives you a revised Form W-4, you have limited time to implement the changes. What’s the 30th day from the date you received the form? What’s the first pay period that ends on or after that day? IRS says you must put the changes into effect by the start of that pay period.