Income Tax Withholding From Wages

 
CONTENT
Federal Register, Volume 85 Issue 30 (Thursday, February 13, 2020)
[Federal Register Volume 85, Number 30 (Thursday, February 13, 2020)]
[Proposed Rules]
[Pages 8344-8372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02849]
[[Page 8343]]
Vol. 85
Thursday,
No. 30
February 13, 2020
Part II
Department of the Treasury
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Internal Revenue Service
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26 CFR Part 31
Income Tax Withholding From Wages; Proposed Rule
Federal Register / Vol. 85, No. 30 / Thursday, February 13, 2020 /
Proposed Rules
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 31
[REG-132741-17]
RIN 1545-B032
Income Tax Withholding From Wages
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document sets forth proposed regulations that provide
guidance for employers concerning the amount of Federal income tax to
withhold from employee's wages, implementing recent changes in the
Internal Revenue Code made by the Tax Cuts and Jobs Act (TCJA), and
reflecting the redesigned 2020 Form W-4 and related IRS publications.
These proposed regulations affect employers that pay wages subject to
Federal income tax withholding and employees who receive wages subject
to Federal income tax withholding.
DATES: Written (including electronic) comments and requests for a
public hearing must be received by April 13, 2020.
ADDRESSES: Submit electronic submissions via the Federal eRulemaking
Portal at www.regulations.gov (indicate IRS and REG-132741-17) by
following the online instructions for submitting comments. Once
submitted to the Federal eRulemaking Portal, comments cannot be edited
or withdrawn. The Department of the Treasury (Treasury Department) and
the Internal Revenue Service (IRS) will publish for public availability
any comment received to their public docket, whether submitted
electronically or in hard copy. Send hard copy submissions to:
CC:PA:LPD:PR (REG-132741-17), Room 5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station, Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Mikhail Zhidkov of the Office of Associate Chief Counsel (Employee
Benefits, Exempt Organizations, and Employment Taxes), (202) 317-4774;
concerning submission of comments or requests for a hearing, please
contact Regina Johnson at (202) 317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Table of Contents
Background
General Statutory and Regulatory Framework
TCJA Changes
Guidance Addressing TCJA
2019 Form W-4 and 2019 Publication 15
2020 Form W-4, Employee's Withholding Certificate
2020 Form W-4P, Withholding Certificate for Pension or Annuity
Payments
Explanation of Provisions and Summary of Comments
1. Number of Withholding Exemptions Claimed
2. Definitions and Interchangeable Terms
3. Percentage Method of Withholding
4. Wage Bracket Method of Withholding
5. Determination and Disclosure of Filing Status
6. Withholding Allowance
7. Additional Withholding Allowance
 a. Estimated Tax Deductions
 b. Estimated Tax Credits
 c. Estimated Tax Payments
 d. Definitions and Special Rules
8. Furnishing of Withholding Allowance Certificates
 a. Commencement of Employment
 b. Change of Status
 c. Special Rules Relating To Withholding Allowance Certificates
 d. Submission of Certain Withholding Allowance Certificates
 e. Notice of Maximum Withholding Allowance Permitted
9. When a Withholding Allowance Certificate Takes Effect
10. Period During Which Withholding Exemption Certificates Remain in
Effect
11. Effective Period of a Withholding Allowance Certificate
12. Form and Contents of Withholding Allowance Certificates
13. Withholding Exemptions for Nonresident Alien Individuals
14. Supplemental Wage Payments
15. Alternative Withholding Methods
16. Additional Withholding
17. Increases in Withholding
18. Exemption From Withholding
Proposed Applicability Date
Paperwork Reduction Act
Special Analyses
Statement of Availability of IRS Documents
Comments and Public Hearing
Drafting Information
List of Subjects in 26 CFR Part 31
Proposed Amendments to the Regulations
Background
 This document sets forth proposed amendments to the Employment Tax
Regulations (26 CFR part 31) under sections 3401 and 3402 of the
Internal Revenue Code (Code). Generally, these proposed regulations
update the regulations under sections 3401 and 3402 to conform to the
changes to sections 3401 and 3402 made by the Tax Cuts and Jobs Act,
Public Law 115-97, 131 Stat. 2054 (2017) (TCJA) and other legislation
enacted since the regulations were last revised. In addition, these
proposed regulations are designed to accommodate the redesigned 2020
Form W-4, ``Employee's Withholding Certificate,'' and related wage
withholding tables and computational procedures established by the IRS
and reflected in Publication 15-T, ``Federal Income Tax Withholding
Methods.''
General Statutory and Regulatory Framework
 Section 3402(a)(1) provides that, except as otherwise provided in
section 3402, every employer making a payment of wages shall deduct and
withhold from such wages a tax determined in accordance with tables or
computational procedures prescribed by the Secretary of the Treasury.
Section 3402(a)(1) further provides that any tables or procedures
prescribed under section 3402(a)(1) shall be in such form, and provide
for such amounts to be deducted and withheld, as the Secretary
determines to be most appropriate to carry out the purposes of chapter
1 (imposition of individual income tax). Section 3402 sets forth
certain methods of withholding but also gives the Secretary broad
regulatory authority in providing for tables or computational
procedures for income tax withholding.
 How an employer applies the withholding tables or computational
procedures generally depends on the withholding allowance certificate
the employee furnishes the employer. Under section 3402(f)(5),
withholding allowance certificates must be in such form and include
such information as the Secretary may by regulations prescribe. Section
31.3402(f)(5)-1 of the current Employment Tax Regulations (hereinafter,
``current regulations'') provides that the withholding allowance
certificate is the Form W-4. An employee who receives wages subject to
withholding under section 3402 is required to furnish his or her
employer a Form W-4 on commencement of employment or, generally, within
10 days after the employee experiences a ``change of status'' that
reduces the ``withholding allowance'' to which the employee is
entitled. See section 3402(f)(2).
 An employee completes Form W-4 based on the employee's personal tax
situation by applying the factors listed in section 3402(f)(1), which,
for 2019 and earlier years, were incorporated into the worksheets to
the Form W-4. One of those factors reflects personal exemptions. See
Section 3402(f)(1)(A).\1\ Also, under section 3402(f)(1)(D), an
employee may take into account additional amounts under section
3402(m), which allows employees to take into account items such as
itemized
[[Page 8345]]
deductions in the manner provided under regulations prescribed by the
Secretary.
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 \1\ Section 151(d)(5) suspends the deduction for personal
exemptions for calendar years 2018-2025.
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 Generally, for 2019 and earlier, an employee could make three
entries on Form W-4 that could affect the amount of income tax withheld
from the employee's wages: The employee's marital status, a number of
withholding allowances based on the factors in section 3402(f)(1), and
any additional amount, not otherwise required, that the employee
requested to be withheld from the employee's wages. See sections
3402(l) (marital status), 3402(f)(1) (withholding allowance), and
3402(i) (increases in amount of withholding not otherwise required
under section 3402).\2\
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 \2\ As discussed later in this preamble, an employee may also
claim exemption from withholding under section 3402(n) on a valid
Form W-4. Other special rules could also apply to affect the amount
of tax withheld, such as for nonresident aliens or lock-in letters,
discussed later in this preamble.
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 Once an employee completes a valid Form W-4, the employee must
furnish the Form W-4 to the employer. The employer puts the Form W-4
into effect in accordance with the timing rules in section 3402(f)(3).
Under Sec. 31.3401(e)-1(b) of the current regulations, the employer is
not required to ascertain whether the number of allowances an employee
claims is greater than the number of withholding allowances to which
the employee is entitled.\3\ Once in effect, the employer generally
applies the entries on an employee's Form W-4 to compute the amount of
income tax to withhold from the employee's regular wages under either
the percentage method of withholding or the wage bracket method of
withholding. See section 3402(b) and (c).\4\
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 \3\ Under Sec. 31.3402(f)(2)-1(e) of the current regulations,
an employer must disregard an ``invalid'' Form W-4 for purposes of
computing withholding. An invalid Form W-4 is one that includes any
alteration or unauthorized addition or that the employee clearly
indicates to be false.
 \4\ Special rules apply to ``supplemental wages'' under Sec.
31.3402(g)-1 of the current regulations. In the case of supplemental
wages in excess of $1,000,000, employers must disregard the entries
on the employee's Form W-4 and apply a mandatory flat rate of
withholding. In the case of supplemental wages of less than
$1,000,000, employers may either disregard the entries on the
employee's Form W-4 and withhold using the optional flat rate or may
use an aggregate procedure, taking into consideration the entries on
the Form W-4 furnished by the employee.
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TCJA Changes
 Prior to TCJA, one withholding exemption was equal to the amount of
one personal exemption provided in section 151(b), prorated to the
payroll period. See section 3402(a)(2) (2017). TCJA enacted section
151(d)(5), which reduced the personal exemption amount to zero for the
years 2018-2025. See TCJA section 11041(a). TCJA also increased the
standard deduction under section 63, increased the child tax credit
under section 24, and created a new credit under section 24 for other
dependents. See TCJA sections 11021 and 11022.
 TCJA permanently modified the wage withholding rules in section
3402(a)(2) and, replaced ``withholding exemptions'' with a
``withholding allowance, prorated to the payroll period.'' See TCJA
section 11041(c)(1). TCJA also repealed section 3401(e), which, prior
to TCJA, provided, for purposes of chapter 24 (relating to collection
of income tax at source on wages), that the ``number of withholding
exemptions claimed'' meant the number of withholding exemptions claimed
in a withholding exemption certificate in effect under section 3402(f)
or in effect under the corresponding section of prior law, except that
if no such certificate was in effect, the number of withholding
exemptions claimed was considered zero. See TCJA section
11041(c)(2)(A).
 TCJA modified section 3402(f), and defined a ``withholding
allowance,'' which is determined based on the factors listed in section
3402(f)(1). See TCJA section 11041(c)(2)(B). TCJA further changed the
list of factors on which the withholding allowance is based and added
that the withholding allowance is determined based on rules determined
by the Secretary. See TCJA section 11041(c)(2)(B). This change to
section 3402(f)(1) revised section 3402(f)(1)(C), entitling an employee
to take into account the number of individuals for which the employee
expects to take an income tax credit under section 24 instead of the
number of individuals with respect to whom the employee reasonably
expects to claim a deduction under section 151. Section 3402(f)(1)(D)
also changed an employee's entitlement to take into account the
standard deduction from an amount generally equal to one withholding
exemption to the standard deduction allowable to such employee (one-
half of the standard deduction in the case of an employee who is
married and whose spouse is an employee receiving wages subject to
withholding). Finally, TCJA added section 3402(f)(1)(F), which provides
that the employee's withholding allowance also takes into account
``whether the employee has withholding allowance certificates in effect
with respect to more than one employer.'' See TCJA section
11041(c)(2)(B).
 TCJA also made conforming changes to the ``change of status'' rules
in section 3402(f)(2), changing ``withholding exemptions'' to
``withholding allowance,'' struck out ``exemption,'' and inserted
``allowance'' in various subsections of section 3402. This resulted in
a conforming change to the statutory name of the withholding exemption
certificate in section 3402(f)(5) to the withholding allowance
certificate. See TCJA sections 11041(c)(2)(B) and (C).
 TCJA amended section 3402(m) by changing the reference from
``withholding allowances'' to ``withholding allowance.'' See TCJA
sections 11041(c)(2)(D) and (E). TCJA added the section 199A deduction
to the list of deductions in section 3402(m)(1) that an employee may
take into account in determining the additional withholding allowance
that the employee is entitled to claim on Form W-4, and struck the
reference to section 62(a)(10) in section 3402(m)(1) with respect to
certain payments made under divorce or separation instruments
previously described in section 62(a)(10). See TCJA sections
11011(b)(4) and 11051(b)(2)(B). Under section 11051(c) of TCJA, there
are special effective date provisions with respect to this change,
which are discussed in more detail in section 7(a) of the Explanation
of Provisions.
 TCJA changed the rules under section 3405(a)(4) for withholding
from periodic payments under section 3405(a) when no withholding
allowance certificate has been furnished, changing the requirement that
the default rate of withholding be determined ``by treating the payee
as a married individual claiming 3 withholding exemptions'' to a
requirement that the default rate of withholding be determined ``under
rules prescribed by the Secretary.'' TCJA also made conforming changes
to the rules under section 3405(a) for withholding from periodic
payments of pensions, annuities, and certain other deferred income,
changing ``exemption'' to ``allowance'' in section 3405(a)(3) and (4).
 The legislative history of TCJA states that ``the Secretary of the
Treasury is to develop rules to determine the amount of tax required to
be withheld by employers from a taxpayer's wages.'' H.R. Rep. No. 115-
466, at 203 (2017).
Guidance Addressing TCJA and Comments Received
 TCJA allowed the Secretary of the Treasury to administer section
3402 before January 1, 2019 without regard to the changes described
above. See TCJA section 11041(f)(2). Nevertheless, on
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January 11, 2018, the Treasury Department and the IRS released Notice
1036, ``Early Release Copies of the 2018 Percentage Method Tables for
Income Tax Withholding,'' which implemented TCJA's tax rate changes,
standard deduction, and suspension of the deduction under section 151.
The Treasury Department and the IRS designed the 2018 withholding
tables to work with the Forms W-4 that employees had already furnished
their employers. On February 28, 2018, the Treasury Department and the
IRS updated Form W-4, ``Employee's Withholding Allowance Certificate,''
incorporating TCJA's changes in the 2018 Form W-4's worksheets and
updated the online withholding calculator to reflect TCJA changes.
Notice 2018-14, 2018-7 I.R.B. 353, published February 12, 2018, allowed
continued use of the 2017 Form W-4 temporarily in 2018 and included a
relief provision stating that employees who experienced changes in
their tax circumstances solely attributable to TCJA were not required
to furnish a new Form W-4 to their employers in 2018. Notice 2018-14
also provided that, for 2018, the rules for withholding from periodic
payments under section 3405(a) when no withholding allowance
certificate has been furnished would parallel the rules for prior years
and would be based on treating the payee as a married individual
claiming three withholding allowances.
 Notice 2018-92, 2018-51 I.R.B. 1038, published December 17, 2018,
addressed some of TCJA's changes to section 3402 and provided interim
rules for the 2019 calendar year. Section 3 of Notice 2018-92 addressed
TCJA's use of ``withholding allowance'' (singular) and provided that
withholding allowances (plural) were to be used for the computational
procedures in 2019, consistent with Form W-4 for 2019 (discussed in the
next section of this preamble) and prior years. Under section 3 of
Notice 2018-92, any reference to a withholding exemption in the
regulations and other guidance under section 3402 was to be applied as
if it were a reference to a withholding allowance. Section 11 of Notice
2018-92 solicited comments generally, but no comments on this issue
were received.
 Section 4 of Notice 2018-92 extended the relief provided in Notice
2018-14 for changes in tax circumstances solely attributable to TCJA.
Section 5 addressed the repeal of section 3401(e), noted earlier in
this preamble, and provided that an employee who fails to furnish a
valid Form W-4 will be treated as single but entitled to the number of
withholding allowances provided in accordance with computational
procedures set forth by the IRS in Publication 15 (Circular E),
``Employer's Tax Guide.'' For 2019, the computational procedures in
Publication 15 provided that employees who fail to furnish a Form W-4
were treated as single with zero withholding allowances. One comment on
this issue was received and is discussed in Section 8(a) of the
Explanation of Provisions.
 Section 6 of Notice 2018-92 allowed employees to include the
employee's estimated deduction under section 199A in determining the
additional withholding allowance under section 3402(m) that the
employee is entitled to claim on Form W-4. Section 6 of Notice 2018-92
requested comments with respect to any additional items employees
should be able to claim under section 3402(m), but no comments on this
issue were received.
 Section 7 of Notice 2018-92 allowed taxpayers to use the online
withholding calculator (now called the Tax Withholding Estimator) or
Publication 505, ``Tax Withholding and Estimated Tax,'' in lieu of the
Form W-4 worksheets. One comment was received on the online withholding
calculator and is discussed in section 7(b) of the Explanation of
Provisions.
 Section 8 of Notice 2018-92 requested comments on alternative
withholding methods under section 3402(h) and announced that the IRS
and the Treasury Department intend to eliminate the combined income tax
withholding and employee Federal Insurance Contributions Act (FICA) tax
withholding tables under Sec. 31.3402(h)(4)-1(b). No comments on this
issue were received. Section 9 of Notice 2018-92 reflected a
modification of the notification requirements for the withholding
compliance program. Specifically, employers in receipt of a notice
prescribing a maximum number of withholding allowances an employee may
claim (a lock-in letter) were instructed not to send a response to the
IRS when the employer no longer employs the employee (within the
meaning of Sec. 31.3402(f)(2)-1(g)(2)(iii)). One commenter thanked the
Treasury Department and the IRS for the change to the notice
requirements in the lock-in letter program.
 Section 10 of Notice 2018-92 provided that, for 2019, the rules for
withholding from periodic payments under section 3405(a) when no
withholding certificate has been furnished would parallel the rules for
prior years and would be based on treating the payee as a married
individual claiming three withholding allowances.
2019 Form W-4 and 2019 Publication 15
 In June 2018, the Treasury Department and the IRS released for
public comment a draft 2019 Form W-4 and draft instructions. Unlike the
relatively minor changes made to Form W-4 in recent years prior to
that, the 2019 draft Form W-4 and instructions incorporated significant
changes intended to improve the accuracy of income tax withholding and
make the withholding system more transparent for employees. Many
comments were received on the draft form and instructions. In response
to comments received from stakeholders, the Treasury Department and the
IRS announced on September 20, 2018, that implementation of the
redesigned form would be postponed until 2020, and that the Treasury
Department and the IRS would continue working closely with stakeholders
as additional changes were made to the form for 2020. In addition,
Notice 2018-92 announced that the 2019 Form W-4 would include minimal
changes to the 2018 Form W-4 and would continue to apply section 3402
by using the existing withholding system under which employees claimed
a number of withholding allowances on a valid Form W-4.
 Although the 2019 Form W-4 continued the computation of withholding
principally based on the number of withholding allowances the employee
claimed on Form W-4, the amount of each withholding allowance for 2019,
like the years before it, was set to what would have been the value of
a personal or dependency exemption in section 151(b) prior to enactment
of TCJA. See Rev. Proc. 2018-57, 2018-49 I.R.B. 827, sections 2.03 and
3.25. For calendar years 2018 through 2025, however, the exemption
amount is zero.\5\ See section 151(d)(5)(A). Moreover, the high value
of each withholding allowance ($4,050 for 2017, $4,150 for 2018, and
$4,200 for 2019) led to rounding errors that made it difficult for some
employees to have
[[Page 8347]]
their withholding equal their tax liability for the year. Accuracy was
even more difficult to achieve for employees claiming tax credits, as
these amounts first had to be converted into tax deductions and then
expressed as a number of withholding allowances. In addition to
limiting accuracy, the use of withholding allowances to compute
withholding is not intuitive, given that wages, deductions, credits,
and taxes are all expressed as dollar amounts, rather than a number of
withholding allowances. Although the 2019 Form W-4 and prior Forms W-4
generally allow employees to achieve a high degree of accuracy if the
employee requests an additional dollar amount to be withheld and/or
uses the withholding calculator (now called the Tax Withholding
Estimator) or Publication 505 in completing the Form W-4, most
employees did not use these options.
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 \5\ The 2019 Publication 15 (Circular E), ``Employer's Tax
Guide,'' started its income tax withholding tables for single
persons at the basic standard deduction ($12,200 for 2019) for
unmarried individuals minus the value of two allowances ($8,400),
which is $3,800 (for an annual payroll period, and otherwise be pro-
rated to the payroll period). Similarly, the 2019 Publication 15
started its income tax tables for married persons at the basic
standard deduction ($24,400) for married individuals filing joint
returns minus the value of three allowances ($12,600), which is
$11,800. Thus, the tables in Publication 15 applied section
151(d)(5)(A). The income tax withholding tables in the 2018
Publication 15 were similar.
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 In addition, employees with multiple withholding allowance
certificates in effect, including married couples filing jointly where
both spouses receive wages subject to withholding, had difficulty
achieving accuracy using the Two-Earner/Multiple Jobs Worksheet. This
worksheet required the employee to estimate wages at the lowest-paying
job and the highest-paying job and, if applicable, reduce the
withholding allowances with respect to the highest-paying job. In some
cases, an employee would need to determine an additional amount to
withhold from each paycheck for the highest-paying job by applying two
tables in the Two-Earners/Multiple Jobs Worksheet. Despite the
complexity of this approach, it did not allow employees to have their
withholding equal their tax liability if there were two or more
simultaneous jobs in the household, and accuracy was further reduced if
new Forms W-4 were not furnished to all of the employers after the
amount of wages from any employer changed. Moreover, it is unclear how
many employees actually used the Two-Earners/Multiple Jobs Worksheet to
compute their withholding allowances, even when it would have been
advantageous for employees to do so to achieve more accurate
withholding.
2020 Form W-4, Employee's Withholding Certificate
 To address the limitations of the prior Form W-4, on May 31, 2019,
a draft of a revised Form W-4 was released for public comment. The
revised Form W-4 is intended to reduce the combined complexity of the
form, instructions, and worksheets and to increase the transparency and
accuracy of the withholding system. The 2020 Form W-4 uses the same
underlying information as the 2019 Form W-4, but replaces complex
worksheets with more straightforward questions. After extensive
stakeholder feedback, the draft 2020 Form W-4 was further revised and
re-released on August 8, 2019. This version was released to allow
automated payroll providers sufficient time to update payroll systems,
and it was announced no further substantive changes to the 2020 Form W-
4 were expected. The form has been renamed from the Employee's
Withholding Allowance Certificate to the Employee's Withholding
Certificate. The final 2020 Form W-4 was released on December 4, 2019,
and then was rereleased on December 31, 2019, to reflect a change in
the medical expense deduction threshold under section 213 for 2020 made
by the Further Consolidated Appropriations Act, 2020, Public Law 116-
94, 133 Stat. 2534, 3228 (2019).
 The 2020 Form W-4 does not use withholding allowances. An employee
checks a filing status (single, married filing separately, head of
household, married filing jointly, or qualifying widow(er)) on the Form
W-4 and, as a result, will generally have the basic standard deduction
corresponding to the employee's anticipated filing status on his or her
income tax return taken into account in determining the amount of tax
withheld from the employee's pay, in accordance with section
3402(f)(1)(E).\6\ In addition, the 2020 Form W-4 streamlines the
multiple jobs procedures and gives employees three options to account
for a working spouse or multiple jobs held concurrently in accordance
with sections 3402(f)(1)(B), (E), and (F): (1) Employees may use the
Tax Withholding Estimator to achieve accurate withholding; (2)
employees may complete the Multiple Jobs Worksheet and enter an
additional amount to withhold from the employee's pay for each pay
period; or (3) employees may check the box in Step 2(c) on the 2020
Form W-4 to request withholding using higher withholding rate tables.
(For married taxpayers filing jointly with two jobs held concurrently,
the effect of checking the box in Step 2(c) is similar to selecting
``Married, but withhold at higher Single rate'' on a Form W-4 from 2019
or earlier.) The 2020 Form W-4 also allows an employee to enter dollar
amounts for tax credits, other income, and deductions the employee
expects to claim on his or her income tax return to reflect the
permitted allowance under sections 3402(f)(1)(C) and (f)(1)(D) and the
increase in the amount of withholding under section 3402(i). The Tax
Withholding Estimator is expected to provide instructions on how to
complete Form W-4 to take into account an employee's personal tax
circumstances in a manner that helps protect the employee's privacy by
limiting the entries the employee is required to make on the 2020 Form
W-4. The IRS will continue to update the Tax Withholding Estimator
based on user feedback and to enhance accuracy, privacy, and the
employee experience.
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 \6\ For employees who do not check the box in Step 2(c) to
request withholding using higher rate tables, part of the basic
standard deduction is built into the percentage method tables in
Publication 15-T; the other part of the standard deduction is
subtracted from the employee's wages before the tables are applied.
This approach is to permit the tables to be used with Forms W-4
furnished in 2019 and prior years. Other entries on the 2020 Form W-
4 can affect other additions and subtractions that determine the
amount of tax withheld from the employee's pay.
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2020 Publication 15-T, Federal Income Tax Withholding Methods
 On June 7, 2019, the IRS released for public comment a draft of
Publication 15-T, ``Federal Income Tax Withholding Methods,'' which
provided percentage method tables, wage bracket withholding tables, and
other computational procedures for employers to use to compute
withholding for employees for the 2020 calendar year, including
employees who furnish a 2020 Form W-4 to be effective for 2020. After
stakeholder feedback, Publication 15-T was revised and rereleased on
August 13, 2019 and was rereleased on November 4, 2019. The income tax
withholding tables reflecting 2020 cost-of-living adjustments were made
available on November 28, 2019, for use with automated payroll systems.
Publication 15-T was finalized and released on December 24, 2019.
 Percentage method tables, wage bracket withholding tables,
discussion on alternative withholding methods, and Tables for
Withholding on Distributions of Indian Gaming Profits to Tribal Members
that were formerly published in Publication 15 (Circular E),
``Employer's Tax Guide,'' Publication 15-A, ``Employer's Supplemental
Tax Guide,'' and Publication 51, ``Agricultural Employer's Tax Guide,''
are now published in Publication 15-T, ``Federal Income Tax Withholding
Methods.'' However, in 2020, the IRS discontinued publishing Formula
Tables for Percentage Method Withholding (for Automated Payroll
Systems), Wage Bracket Percentage Method Tables (for Automated Payroll
Systems), and Combined Federal Income Tax, Employee Social Security
Tax, and Employee Medicare Tax Withholding Tables.
[[Page 8348]]
 In addition, the IRS has discontinued publishing Notice 1036,
``Early Release Copies of the Percentage Method Tables for Income Tax
Withholding,'' effective beginning with calendar year 2020, and instead
will post information previously included in Notice 1036 in early
release drafts of Publication 15 (www.irs.gov/Pub15) and Publication
15-T (www.irs.gov/Pub15T) for use by the public and payroll community.
Notice 1036 was developed in 1996 before advanced release drafts of
forms and publications were posted on www.irs.gov/draftforms and
various product web pages. The information previously included in
Notice 1036 generally will be available on www.irs.gov more quickly
than Notice 1036 was made available in prior years.
2020 Form W-4P, Withholding Certificate for Pension or Annuity Payments
 Section 3405(a) generally requires the payor of periodic payments
from pensions, annuities, or certain other deferred income to withhold
from such payments as if such payments were wages paid by an employer
to an employee. Under section 3405(a)(2), an individual may elect not
to have withholding apply to periodic payments from pensions,
annuities, or certain other deferred income; however, such election is
not available with respect to eligible rollover distributions or
certain payments to be made outside of the United States or its
possessions. See sections 3405(c)(1) (eligible rollover distributions)
and 3405(e)(13) (certain payments to be made outside the United States
or its possessions). But see proposed Sec. 31.3405(e)-1 (certain
payments not considered made outside the United States).
 An individual's withholding election (or election not to have
withholding apply, if available), with respect to pensions, annuities,
or certain other deferred income, including periodic payments under
section 3405(a), generally is made using Form W-4P, Withholding
Certificate for Pension or Annuity Payments. On December 13, 2019, the
IRS early released a draft 2020 Form W-4P. As the early release draft
indicates, the Treasury Department and the IRS do not plan to redesign
the 2020 Form W-4P in the same manner as the 2020 W-4. Instead, the
2020 Form W-4P will continue to request withholding allowances and
marital status, rather than filing status, with respect to periodic
payments under section 3405(a). Similarly, the Step 2(c) checkbox on
the 2020 Form W-4 to request withholding using a higher withholding
rate table will be inapplicable for the 2020 Form W-4P. Notice 2020-3
(which the IRS released on December 18, 2019 in advance of its expected
publication in the 2020-3 edition of the Internal Revenue Bulletin)
describes withholding rules under section 3405(a) for the 2020 calendar
year and provides additional information regarding the 2020 Form W-4P.
Publication 15-A includes further information regarding the 2020 Form
W-4P and alerts taxpayers that the related withholding tables and
computational procedures for the 2020 Form W-4P are included in
Publication 15-T.
Explanation of Provisions
 These proposed regulations incorporate the changes made by TCJA to
sections 3401 and 3402 and provide flexible and administrable rules for
income tax withholding from wages that work with both the 2020 Form W-4
and its related tables and computational procedures described in
Publication 15-T, and Forms W-4 and related tables and computational
procedures provided in 2019 and earlier years. Because the ultimate
goal of income tax withholding is to achieve withholding from
employee's wages that accurately reflects the provisions of chapter 1
applicable to wages and the period wages are paid, the Treasury
Department and the IRS have determined that the mechanical details of
income tax withholding should be provided in forms, instructions,
publications, and other guidance, so that these materials can be
quickly updated as needed (for legislative changes or other reasons) to
give payroll processors adequate time to program their systems to
withhold the proper amount of income tax from employees' pay. These
proposed regulations are generally compatible with the income tax
withholding system in effect for 2019, as well as the system in effect
for 2020, and as discussed in the Proposed Applicability Date section
of this preamble, may be relied upon by employers for withholding until
final regulations are published.
 The changes made by TCJA to section 3405(a) (withholding on
pensions, annuities, and certain other deferred income) were addressed
in Notice 2018-14 and Notice 2018-92 for the 2018 and 2019 calendar
years, respectively. These proposed regulations do not address
withholding under section 3405(a); instead, Notice 2020-3 describes
withholding rules under section 3405(a) for the 2020 calendar year.
1. Number of Withholding Exemptions Claimed
 In accordance with the change made by section 11041(c)(2)(A) of
TCJA and as indicated in section 5 of Notice 2018-92, the proposed
regulations remove Sec. 31.3401(e)-1. Because section 11041(c) of TCJA
repealed section 3401(e) and generally changed the references in
Chapter 24 from ``withholding exemptions'' to ``withholding
allowance,'' current regulations under section 3401(e) are no longer
consistent with the Code. (See section 2 of this Explanation of
Provisions for definitions and interchangeable terms). However, rules
similar to the substantive rules currently under Sec. 31.3401(e)-1 are
included in other parts of these proposed regulations. Section 5 of
this Explanation of Provisions discusses the withholding allowance to
which an employee is entitled, and section 6(a) of this Explanation of
Provisions discusses the rules for employees who fail to furnish Forms
W-4.
2. Definitions and Interchangeable Terms
 These proposed regulations clarify that, for purposes of chapter 24
of the Code and subpart E of part 31 of the Employment Tax Regulations
(relating to collection of income tax at source), any reference to
withholding exemption certificates means withholding allowance
certificates unless otherwise stated. Section 11041 of TCJA changed the
statutory title of the withholding exemption certificate to the
withholding allowance certificate. However, under section 3402(f)(4), a
withholding allowance certificate in effect under section 3402(f)
generally continues in effect until superseded by another such
certificate that is effective under section 3402(f). Thus, the rules
proposed in these regulations generally apply to both withholding
exemption certificates and withholding allowance certificates.
 These proposed regulations generally refer to the Form W-4 as the
withholding allowance certificate, the statutory term in section
3402(f)(5). However, proposed Sec. 31.3402(f)(5)-1 provides that the
Form W-4, ``Employee's Withholding Certificate,'' previously called
``Employee's Withholding Allowance Certificate,'' is the form
prescribed for the withholding allowance certificate required to be
furnished under section 3402(f)(2).
 An employee is not required to furnish a new Form W-4 solely
because of the 2020 Form W-4 redesign, regardless of when the
employee's Form W-4 currently in effect was furnished. Similarly, an
employer must generally
[[Page 8349]]
continue to compute the amount of tax to be withheld from an employee's
wages based on a valid Form W-4 furnished by the employee regardless of
when the employee furnished the Form W-4 on which such computation is
based.\7\ The 2020 Publication 15-T provides guidance on how employers
will withhold income tax, under the tables and computational procedures
set forth therein, using Forms W-4 furnished and in effect on or before
December 31, 2019. An employer may ask all employees first paid wages
before 2020 to furnish a 2020 Form W-4, but in connection with the
request the employer should explain that (1) employees are not required
to furnish a new Form W-4, and (2) if the employee does not furnish a
2020 Form W-4, the amount of tax to be withheld from the employee's
wages will continue to be based on the last valid Form W-4 previously
furnished.
---------------------------------------------------------------------------
 \7\ This rule does not apply to a Form W-4 claiming exemption
from withholding, which, for a 2019 Form W-4, will expire on
February 18, 2020. Under proposed Sec. 31.3402(f)(4)-1(b), if a
form claiming exemption from withholding expires, and the employee
does not furnish a valid Form W-4 either renewing his or her
exemption or claiming a withholding allowance, the employer must
treat the employee as single but having the withholding allowance
provided in forms, instructions, publications, and other guidance
prescribed by the IRS. Publication 15 for 2020 provides that such an
employee should be treated as if the employee had checked the box
for single or married filing separately in Step 1(c) and made no
entries in Step 2, Step 3, or Step 4 of the 2020 Form W-4.
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3. Percentage Method of Withholding
 Section 31.3402(b)-1 of the current regulations provides that the
amount of tax to be deducted and withheld under the percentage method
of withholding is determined under the applicable percentage method
withholding table included in Circular E (Employer's Tax Guide)
according to the instructions therein. These proposed regulations
clarify that employers that use the percentage method of withholding
must compute the amount of tax to be withheld based on the entry for
the employee's anticipated filing status or marital status and other
entries on the employee's Form W-4 using the applicable percentage
method tables and computational procedures in the applicable forms,
instructions, publications, and other guidance prescribed by the IRS
issued for use with respect to the period in which wages are paid. In
2020, percentage method tables and computational procedures are
provided in Publication 15-T.
4. Wage Bracket Method of Withholding
 Section 31.3402(c)-1(a) of the current regulations provides that,
for employers using the wage bracket withholding method, the correct
amount of withholding is determined under the applicable wage bracket
withholding table in the Circular E (Employer's Tax Guide) issued for
use with respect to the period in which such wages are paid. These
proposed regulations clarify that employers that use the wage bracket
withholding method and computational procedures based on the entry for
the employee's anticipated filing status or marital status and other
entries on the employee's Form W-4 should use the applicable wage
bracket method tables and computational procedures in forms,
instructions, publications, and other guidance prescribed by the IRS
issued for use with respect to the period in which wages are paid. In
2020, wage bracket method tables and computational procedures are
provided in Publication 15-T. In addition, these proposed regulations
update the current regulations for the change in the Form W-4 and its
computational procedures and provide that employers that use wage
bracket method withholding tables applicable to a daily or
miscellaneous pay period must use the wage bracket withholding tables
applicable to the employee's filing status or marital status.
5. Determination and Disclosure of Filing Status
 Under section 3402(l)(1), an employer must treat an employee as
single unless there is in effect a withholding allowance certificate
indicating that the employee is married. Although section 3402(l)
speaks in terms of single and married persons and provides that an
employee will be treated as single unless the employee furnishes a
valid Form W-4 claiming married status, the Treasury Department and the
IRS have determined that this provision does not preclude adoption of
head of household status to compute withholding for certain filers
because the ability to claim head of household filing status furthers
the goal of accuracy in withholding and, thus, reflects the provisions
of chapter 1. See section 3402(a)(1)(B). Under section 1(j), for
calendar years 2018 through 2025,\8\ there is a separate income tax
rate table for taxpayers filing as head of household. Providing for a
head of household filing status on the Form W-4 and providing
withholding tables for head of household filing status further the goal
of accuracy in withholding. An employee may select head of household
filing status only if the employee reasonably expects to be eligible to
claim head of household filing status under section 2(b) and Sec. 1.2-
2(b) of the Income Tax Regulations on the employee's income tax return.
---------------------------------------------------------------------------
 \8\ Sections 1(b) and (i) provide separate rates for head of
household filers if the rates in section 1(j) cease to apply.
---------------------------------------------------------------------------
 On the other hand, although section 1 rates applicable to unmarried
individuals and married individuals filing separate returns are
different at higher marginal rates, the Treasury Department and the IRS
have determined that the burden of providing separate withholding
tables for married individuals filing separate returns outweighs the
added accuracy that would be provided by having separate filing
statuses for these two categories for the Form W-4 and tables.
Consequently, the proposed regulations provide for three filing
statuses: Single, head of household, and married filing jointly.
 Section 31.3402(l)-1(a) of the current regulations provides that in
computing the tax to be withheld from an employee's wages, the employer
must apply the withholding table that relates to employees who are
single persons unless there is in effect a withholding allowance
certificate indicating that the employee is married. These proposed
regulations generally incorporate the principle in Sec. 31.3402(l)-
1(a) of the current regulations and provide that the employee's entry
for the employee's anticipated marital status or filing status on the
Form W-4 determines what table employers apply under either the
percentage method of withholding or wage bracket method of withholding.
Employers may generally rely on the employee's entry for filing status
on the Form W-4. These proposed regulations provide, consistent with
section 3402(l)(1), that an employee who fails to furnish a valid Form
W-4 must be treated as single.
 Under section 3402(l)(2), the employee may furnish the employer a
withholding allowance certificate indicating that the employee is
married only if the employee is married (determined with the
application of the rules in section 3402(l)(3), discussed in more
detail below). Section 31.3402(l)-1(b)(1) of the current regulations
generally states that an employee's marital status determines whether
the employee may select married on the Form W-4. Generally, under the
current regulations, the employee's anticipated filing status on the
employee's income tax return does not determine whether an employee may
indicate that he or she is married on the Form W-4. These proposed
regulations change this rule.
[[Page 8350]]
 Specifically, in defining ``married'' under section 3402(l)(2), the
Treasury Department and the IRS have determined that, in addition to
the employee's marital status, the amount of tax to be withheld should
also be determined by reference to the employee's anticipated filing
status on the employee's income tax return because this furthers
accuracy and reflects the applicable provisions of chapter 1. Under
section 1(j), for calendar years 2018-2025,\9\ different tax rates
apply to married individuals filing joint returns than married
individuals filing separate returns. Correspondingly, married
individuals who anticipate filing separately should not be allowed to
select married filing jointly on the Form W-4 because, otherwise, such
individuals would risk being significantly underwithheld. Therefore,
these proposed regulations provide that an employee may only select
married filing jointly on the employee's Form W-4 if the employee (1)
reasonably expects to file jointly a single return of income under
Subtitle A with his or her spouse, (2) is lawfully married for federal
tax purposes within the meaning of Sec. 301.7701-18(b) on the day the
Form W-4 is furnished, and (3) is treated as married within the meaning
of section 3402(l)(3).
---------------------------------------------------------------------------
 \9\ Sections 1(b) and (i) provide separate rates for married
individuals filing joint returns if the rates in section 1(j) cease
to apply.
---------------------------------------------------------------------------
 Furthermore, in accordance with section 3402(l)(3)(A), these
proposed regulations incorporate a rule similar to Sec. 31.3402(l)-
1(c) of the current regulations and provide that an employee may not
select married filing jointly filing status on the Form W-4 if the
employee is legally separated from his or her spouse under a decree of
divorce or separate maintenance. These proposed regulations also update
Sec. 31.3402(l)-1(c)(1)(ii) of the current regulations and provide
that an employee may not select married filing jointly status on the
Form W-4 if the employee or the employee's spouse is, or on any
preceding day within the same calendar was, a nonresident alien unless
the employee has made or reasonably expects to make an election under
section 6013(g) \10\ in the time and manner prescribed in Sec. 1.6013-
6(a)(4).
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 \10\ Section 6013(g) was added by section 1012 of the Tax Reform
Act of 1976, Public Law 94-455, 90 Stat. 1612 (1976). Under section
6013(g)(1)(B), this election applies for purposes of chapter 24.
---------------------------------------------------------------------------
 In accordance with section 3402(l)(3)(B), these proposed
regulations provide that an employee may generally select married
filing jointly on the Form W-4 if the employee's spouse (other than a
spouse referred to in section 3402(l)(3)(A)) died during the employee's
taxable year. Similarly, an employee may select married filing jointly
status if the employee's spouse died during the previous two taxable
years, and the employee reasonably expects as of the close of the
current taxable year to be a surviving spouse as defined in section
2(a) and Sec. 1.2-2(a) of the Income Tax Regulations and claim
qualifying widow(er) filing status on the employee's income tax return.
This rule is similar to Sec. 31.3402(l)-1(c)(2) of the current
regulations.
 Under section 3402(l)(2) an employee whose marital status changes
from married to single must, at such time as the Secretary may by
regulations prescribe, furnish the employer with a new withholding
allowance certificate. Because of the addition of head of household
filing status for withholding purposes, these proposed regulations
provide that an employee whose anticipated filing status changes from
married filing jointly (or qualifying widow(er)) to head of household
or single, must, generally, within 10 days of the change furnish his or
her employer with a new Form W-4. In addition, an employee whose
anticipated filing status changes from head of household to single,
must generally furnish his or her employer with a new Form W-4 within
10 days of the change. However, the employee does not have to furnish a
new Form W-4 within 10 days of the change of status if the amount of
tax the employee expects to be withheld is greater than the amount of
the employee's anticipated income tax liability. Nonetheless, in all
cases, an employee whose anticipated filing status changes from married
filing jointly (or qualifying widow(er)) to head of household or single
(including married filing separately) or from head of household to
single (including married filing separately) must furnish a new Form W-
4, to take effect in the following calendar year, to his or her
employer by the later of December 1 of the calendar year in which the
change occurs, or within 10 days of the change.
6. Withholding Allowance
 These proposed regulations provide that an employee is entitled to
a ``withholding allowance'' as provided in section 3402(f)(1) but only
if the employee furnishes a valid Form W-4 claiming the withholding
allowance. This is similar to the rule in Sec. 31.3402(f)(1)-1(a) of
the current regulations. In addition, these proposed regulations
provide that the employer is not required to ascertain whether the
withholding allowance the employee claims is greater than the allowance
to which the employee is entitled.
 The proposed regulations define the withholding allowance, but in
accordance with section 3402(a)(1), leave the computational details to
forms, instructions, publications, and other guidance prescribed by the
IRS. In 2020, these computational details will be set forth in the Form
W-4, Publication 505, Publication 15-T, and the Tax Withholding
Estimator.\11\ The Treasury Department and the IRS have determined that
this flexible computation of the withholding allowance is consistent
with section 3402(a)(1) because it is the most appropriate way to
reflect the provisions of chapter 1 applicable to wages for a given
calendar year. This approach will also allow the IRS to make adjustment
as appropriate to reflect any legislative changes to chapter 1 in
withholding on employees' pay or based on statistical data.
---------------------------------------------------------------------------
 \11\ The withholding allowance for nonresident alien individuals
is subject to the rules in proposed Sec. 31.3402(f)(6)-1, and, for
2020, nonresident aliens will find further guidance in IRS Notice
1392, ``Supplemental Form W-4 Instructions for Nonresident Aliens.''
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 Under these proposed regulations, the withholding allowance under
section 3402(f)(1) is determined by reference to seven factors. First,
the withholding allowance depends on whether the employee is an
individual for whom a deduction is allowable under section 151. See
section 3402(f)(1)(A). The regulations repeat the statutory language
with respect to this factor. Second, if the employee is married, the
withholding allowance depends on whether the employee's spouse is
entitled to the section 151 deduction, or would be so entitled if the
spouse were an employee receiving wages, but only if the spouse does
not have in effect a Form W-4 claiming an allowance for the section 151
deduction. See section 3402(f)(1)(B). The first and second factors,
however, have no effect on withholding for calendar years 2018 through
2025 because section 151(d)(5) suspends the deduction for personal
exemptions for calendar years 2018 through 2025. Accordingly, these
factors are not taken into account on the 2020 Form W-4.
 Third, if the employee is married, the withholding allowance
depends on whether the employee's spouse is entitled to any additional
amount under section 3402(m) or would be so entitled if the employee's
spouse were an employee receiving wages, but only if the spouse does
not have in effect a withholding allowance certificate claiming the
allowance. See section 3402(f)(1)(B). The 2020 Form W-4 takes
[[Page 8351]]
this factor into account by instructing taxpayers to complete the steps
corresponding to any additional amount of tax deductions or tax credits
on only one Form W-4 in the household.
 Fourth, the withholding allowance depends on the number of
individuals for whom a credit under section 24(a) may reasonably be
expected to be allowable for the calendar year. See section
3402(f)(1)(C). These proposed regulations clarify that this means the
credit under section 24(a) that the employee reasonably expects to
claim on the employee's income tax return. This includes both the child
tax credit and the credit for other dependents. The proposed
regulations also clarify that the employee may not take into account
any credit under section 24(a) that is claimed on another Form W-4. The
2020 Form W-4 takes this factor into account in Step 3 of the form.
 Fifth, the withholding allowance depends on any additional amounts
the employee elects to take into account under section 3402(m), but
only if the employee's spouse does not have in effect a withholding
allowance certificate making this election. See section 3402(f)(1)(D).
These proposed regulations clarify this factor and state that the
withholding allowance depends on additional deductions, credits, or
other items the employee takes into account under proposed Sec.
31.3402(m)-1. Specifically, proposed Sec. 31.3402(m)-1(e)(3) allows
the total deductions, credits, or estimated tax payments to be claimed
on only one Form W-4. This is similar to the rule in Sec. 31.3402(m)-
1(f) of the current regulations. Thus, an employee or the employee's
spouse may not claim an amount of a deduction, credit, or estimated tax
payment in proposed Sec. 31.3402(m)-1 if that same amount is claimed
on any other Form W-4 in effect for the employee or the employee's
spouse.
 The 2020 Form W-4 takes into account estimated tax credits for
dependents allowable under proposed Sec. 31.3402(m)-1(b) in Step 3.
The instructions to the 2020 Form W-4 clarify that employees may also
claim other credits such as the education tax credit or the foreign tax
credit in Step 3 of the 2020 Form W-4. The 2020 Form W-4 takes into
account estimated tax deductions allowable under proposed Sec.
31.3402(m)-1(c) in Step 4(b), which allows employees to claim
deductions such as itemized deductions, student loan interest
deductions, and deductible Individual Retirement Arrangement (IRA)
contributions. Employees who wish to claim these and other deductions
should complete the Deductions Worksheet on page 3 of Form W-4.
Finally, under proposed Sec. 31.3402(m)-1, certain employees may take
into account the credit for income tax withholding under chapter 24 and
may take into account estimated tax payments paid provided they take
into account nonwage income and follow the instructions to the Tax
Withholding Estimator.\12\ As stated previously in this preamble, the
IRS will continue to update the Tax Withholding Estimator. The Treasury
Department and IRS also request comments on whether changes should be
made to the proposed regulations so that in the future the Tax
Withholding Estimator may enable employees to have all required
withholding on wages while taking into account expected estimated tax
payments on non-wage income to be made later in the year, and, if so,
what safeguards should be added to prevent inappropriate
underwithholding on wages.
---------------------------------------------------------------------------
 \12\ An employee whose employer must withhold for that employee
pursuant to a notice under proposed Sec. 31.3402(f)(2)-1(g)(2)
(lock-in letter) may not take into account any credit for tax
withheld on wages under section 31(a) or any estimated tax payments.
Thus, an employee for whom a lock-in letter is issued may not take
into account income tax withheld to date or estimated tax payments
in computing the employee's withholding allowance.
---------------------------------------------------------------------------
 Sixth, the withholding allowance depends on the standard deduction
allowable to the employee (one-half of the standard deduction in the
case of an employee who is married (as determined under section 7703)
and whose spouse is an employee receiving wages subject to
withholding). See section 3402(f)(1)(E). These proposed regulations
define this as the basic standard deduction (as defined in section
63(c)(2)) relating to the filing status the employee reasonably expects
to claim on the employee's income tax return for the calendar year for
which the withholding allowance is claimed. (The additional standard
deduction for the aged and blind is allowed under Sec. 31.3402(m)-
1(c)(5).) The 2020 Form W-4 takes into account the basic standard
deduction allowable to the employee under section 3402(f)(1)(E) by
having an employee check the box for the employee's anticipated filing
status in Step 1(c). The basic standard deduction for each filing
status is generally applied without further adjustment if the employee
completes only Step 1 (including checking the box for a particular
filing status) and Step 5 (signing under penalties of perjury) on the
2020 Form W-4.\13\
---------------------------------------------------------------------------
 \13\ An employee--other than a student from India or business
apprentice from India--who identifies as a nonresident alien
employee by following the instructions in Notice 1392 will not have
the basic standard deduction subtracted from the employee's wages.
For 2020, the Publication 15-T provides special procedures employers
must use with respect to such employees.
---------------------------------------------------------------------------
 Seventh, the withholding allowance depends on whether the employee
has withholding allowance certificates in effect with respect to more
than one employer. See section 3402(f)(1)(F). For this factor, these
proposed regulations reference the Form W-4 and other computational
instructions (such as the Tax Withholding Estimator) to determine the
adjustment resulting from multiple Forms W-4 the employee, the
employee's spouse, or both have or reasonably expect to have in effect
with respect to one or more employers. The Treasury Department and the
IRS have determined that the Form W-4 and the instructions to the form
are best able to direct employees how to take this factor into account
in determining their withholding allowance and completing the Form W-4
due to the variety of fact patterns and the need to adjust this rule
for the future based on statistical data or changes in the law to
ensure accurate withholding on wages under chapter 1.
 The 2020 Form W-4 provides employees three options with respect to
multiple Forms W-4. Employees may use the Tax Withholding Estimator,
may enter an amount computed on the Multiple Jobs Worksheet, or may
select higher withholding rate tables by checking the box in Step 2(c)
of the form. If the box in Step 2(c) is checked, Publication 15-T
instructs employers to prorate and apply one-half of the standard
deduction and marginal rates that account for equal wages for
employment held concurrently. Thus, in the case of married taxpayers
filing jointly, Publication 15-T applies the parenthetical in section
3402(f)(1)(E), which allows one-half of the standard deduction to an
employee who is married and whose spouse is receiving wages subject to
withholding.
7. Additional Withholding Allowance
 These proposed regulations provide rules under which an employee
determines the additional withholding allowance or additional
reductions in withholding the employee is entitled to claim on a Form
W-4 under section 3402(m). Under section 3402(m), in determining the
additional withholding allowance or additional reductions in
withholding, the employee may take into account estimated tax
deductions under section 3402(m)(1), estimated tax credits under
section 3402(m)(2), and such additional deductions and other items as
may be specified by the Secretary in regulations under section
3402(m)(3). This additional withholding
[[Page 8352]]
allowance and additional reductions in withholding are part of the
``withholding allowance'' the employee is entitled to claim as provided
in section 3402(f)(1)(D).
 Section 6 of Notice 2018-92 discussed section 3402(m) generally and
allowed taxpayers to include the estimated deduction under section 199A
in determining the additional withholding allowance or additional
reductions in withholding under section 3402(m). Section 6 of Notice
2018-92 requested comments with respect to the list of items set forth
in Sec. 31.3402(m)-1(b). No comments on this issue were received. The
Treasury Department and the IRS again request comments with respect to
section 3402(m) generally, and, specifically, with respect to the
aspects of these proposed regulations described in further detail in
the following sections.
a. Estimated Tax Deductions
 These proposed regulations implement section 3402(m)(1) by
continuing the rule that taxpayers may take into account estimated
itemized deductions (as defined in section 63(d)) allowable under
Chapter 1. These proposed regulations combine the rule in Sec.
31.3402(m)-1(b)(1) and Sec. 31.3402(m)-1(c)(3) of the current
regulations and define itemized deductions in proposed Sec.
31.3402(m)-1(b)(1) by cross-referencing to section 63(d). This change
updates the cross-reference to the definition of itemized deductions to
conform to section 102 of the Tax Reform Act of 1986, Public Law 99-
514, 100 Stat. 2085, 2101 (1987) (defining itemized deductions in
section 63(d)).
 These proposed regulations also implement section 3402(m)(1) by
allowing employees to take into account the employee's estimated
deduction under section 199A in determining the additional withholding
allowance or other reductions in withholding under section 3402(m) that
the employee is entitled to claim on a Form W-4. This is consistent
with section 6 of Notice 2018-92.
 Section 11051(b)(2)(B) of TCJA struck the reference to section
62(a)(10) (regarding certain payments made under divorce or separation
instruments) in section 3402(m)(1) as a permitted estimated deduction.
Under section 11051(c) of TCJA, this change generally applies to any
divorce or separation instrument (as defined in section 71(b)(2) of the
Code as in effect before December 22, 2017) executed after December 31,
2018, or to any divorce or separation instrument (as so defined)
executed on or before December 22, 2017, and modified thereafter, if
the modification expressly provides that the amendments made by section
11051 of TCJA apply to such modification. However, because these
proposed regulations generally allow taxpayers to take into account
deductions described in section 62 that the employee reasonably expects
will be allowable on the employee's income tax return for the year such
item is claimed, the Treasury Department and the IRS have determined
that no special rule is necessary with respect to payments described in
section 62(a)(10) for the period prior to the effective date of this
change to section 3402(m)(1). Employees who, under section 11051(c) of
TCJA, are eligible for the deduction described in section 62(a)(10),
may generally continue to take this deduction into account in
determining the employee's withholding allowance or other reductions in
withholding if the employee reasonably expects this deduction to be
allowable on the employee's income tax return for the year the Form W-4
is in effect.
 Section 3402(m)(3) authorizes the Secretary to prescribe
regulations that allow employees to take into account such additional
deductions (including the additional standard deduction under section
63(c)(3) for the aged and blind) in determining the additional
withholding allowance or other reductions in withholding. Under this
authority, these proposed regulations allow taxpayers to take into
account the estimated additional standard deduction for the aged and
blind provided under section 63(c)(3) and section 63(f). These proposed
regulations also allow taxpayers to take into account the estimated
deduction or deductions allowed for personal exemptions under section
151. Although, under section 151(d)(5), this deduction has been
suspended for the calendar years 2018 through 2025, the Treasury
Department and the IRS have determined that the limited period of the
suspension and the specific reference to section 151 in section
3402(f)(1)(A) necessitate including in these proposed regulations a
provision for a deduction for a dependency exemption or dependency
exemptions under section 151 for changes scheduled to take effect after
December 31, 2025.
 The Treasury Department and the IRS have also determined,
consistent with Sec. 31.3402(m)-1(b) of the current regulations, that
employees should be permitted to take into account estimated deductions
described in section 62, with certain exceptions, in determining the
employee's additional withholding allowance or other reductions in
withholding under section 3402(m). The proposed regulations provide for
three exceptions. First, these proposed regulations provide that
employees may not take into account any estimated deduction described
in section 62(a)(2) if the reimbursement or payment for the amount
allowable as the deduction is excludible from wages subject to income
tax withholding. For example, an employee may not take into account any
expenses described in section 62(a)(2)(A) that are reimbursed under a
reimbursement and expense allowance arrangement since those
reimbursements are excludible from wages under Sec. 31.3401(a)-4(a).
The Treasury Department and the IRS have determined that it is
inappropriate to allow an employee to claim an additional withholding
allowance or other reductions in withholding with respect to items that
are otherwise excludible from wages.
 Second, these proposed regulations provide that, in determining the
employee's additional withholding allowance or other reductions in
withholding, employees are not allowed to take into account estimated
trade or business deductions described in section 62(a)(1), estimated
deductions for the production of income that are attributable to
property held for the production of rent or royalties under section
62(a)(4), or estimated deductions described in section 62(a)(5) unless
these amounts result in an aggregate net loss on schedules C (Profit or
Loss from Business), E (Supplemental Income and Loss), or F (Profit or
Loss from Farming) of Form 1040. Third, these proposed regulations
provide that employees are not allowed to take into account estimated
losses from the sale or exchange of property described in section
62(a)(3) unless these amounts result in a net loss on Schedule D
(Capital Gains and Losses) of Form 1040 or on the last line of Part II
of Form 4797 (Sale of Business Property). These limitations on
estimated deductions described in section 62(a)(1), (3), (4), and (5)
are consistent with Sec. 31.3402(m)-1(b)(12) of the current
regulations, which affirmatively permits taking into account the
estimated deductions for these items ``from'' the applicable schedules.
In addition, these proposed regulations continue the rule in Sec.
31.3402(m)-1(b)(7) of the current regulations and allow employees to
take into account a net operating loss carryover under section 172 in
determining the employee's additional withholding allowance or other
reductions in withholding under section 3402(m).
[[Page 8353]]
b. Estimated Tax Credits
 These proposed regulations allow an employee to take into account
estimated income tax credits allowable under chapter 1 in determining
the employee's additional withholding allowance or other reductions in
withholding and update the cross reference in Sec. 31.3402(m)-1(b)(2)
of the current regulations to conform to changes under section 471 of
the Deficit Reduction Act of 1984, Public Law 98-369, 98 Stat. 494, 825
(1984). (The credit under section 24 of the Code (child tax credit) is
part of the employee's withholding allowance under section
3402(f)(2)(C) and is thus not part of the employee's additional
withholding allowance).
 Section 31.3402(m)-1(b)(2)(i) of the current regulations does not
allow an employee to take the credit for tax withheld on wages under
section 31(a) into account in determining the employee's additional
withholding allowance or other reductions in withholding under section
3402(m). However, section 7 of Notice 2018-92 stated that the Treasury
Department and the IRS intend to update the regulations under section
3402 to explicitly allow employees to use the withholding calculator
(now called the Tax Withholding Estimator) or Publication 505 to
determine what entries to make on Form W-4 in lieu of completing
certain worksheets included with the Form W-4. The Tax Withholding
Estimator currently takes into account the amount of income tax
withheld to date to estimate the amount of withholding required for the
remaining payroll periods during the calendar year. Thus, the Treasury
Department and the IRS have determined that employees may take into
account the credit permitted under section 31(a) for income tax
withheld under chapter 24 to date but only if (1) on the day the
employee estimates the amount of income tax withheld, the amount has
been withheld from the employee's wages (or other payments treated as
wages for chapter 24 purposes, such as pension payments subject to
withholding under section 3405 or certain other payments subject to
backup withholding under section 3406) and (2) the employee enters this
amount of tax withheld pursuant to the instructions in the Tax
Withholding Estimator or Publication 505.\14\
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 \14\ An employee subject to a lock-in letter may not take the
credit under section 31(a) into account.
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 The Treasury Department and the IRS have determined that these
limitations in taking into account the credit for tax withheld are
necessary to prevent employees from having a disproportionate amount of
income tax withheld at the end of a calendar year. Historically, the
withholding tables and procedures established under the Code are
structured so that withholding from wages generally occurs evenly
throughout the year. However, if an employee's employer has already
withheld more Federal income tax from the employee's wages than
necessary to satisfy the employee's anticipated income tax liability,
employees should generally be able to take any excess amounts withheld
into account.
 One commenter to Notice 2018-92 suggested that the withholding
calculator (now called the Tax Withholding Estimator) should include an
entry accommodating an annual payroll period so a multiplier of one can
be used if prior year tax information is used for the entries in the
calculator. The Tax Withholding Estimator currently allows employees to
enter weekly, bi-weekly, semi-monthly, and monthly payroll frequencies
because those are the most common types of payroll periods used by
employers. The Treasury Department and the IRS request comments on
whether there is a need to provide additional payroll frequencies--
other than weekly, bi-weekly, semi-monthly, and monthly--as part of the
Tax Withholding Estimator. Also, the Treasury Department and the IRS
note that the Tax Withholding Estimator currently asks the employee to
enter the total wages the employee expects to receive this year and
bases its recommendation, in part, on that annual entry. In addition,
the Tax Withholding Estimator makes recommendations for the current
year, and prior year information may not always be useful when
employees' circumstances change.
 With regard to nonresident aliens, these proposed regulations
continue the rule in Sec. 31.3402(m)-1(b)(2)(ii) of the current
regulations to disregard the credit for tax withheld on nonresident
aliens and foreign corporations. However, these proposed regulations
update the cross-reference for the credit for tax withheld on
nonresident aliens from section 32 to section 33 consistent with
section 471(c) of the Deficit Reduction Act of 1984.
 Finally, these proposed regulations provide that an employee may
not take into account, in determining the employee's additional
withholding allowance or other reductions in withholding under section
3402(m), any estimated chapter 1 tax credits the employee has claimed
or expects to be refunded as a result of filing an IRS form other than
the employee's individual income tax return (Form 1040). For example,
an employee may not take into account an estimated credit under section
34 for certain uses of gasoline and special fuel the employee claimed
or expects to claim on Form 8849, but if the employee expects to claim
the section 34 credit on a Form 4136 attached to the employee's
individual income tax return, the employee may take this credit into
account. This rule is similar to Sec. 31.3402(m)-1(b)(2)(iii) of the
current regulations. However, under these proposed regulations, this
rule applies to all chapter 1 tax credits that an employee claimed or
expects to claim on an IRS form other than the employee's individual
income tax return. The Treasury Department and the IRS have determined
that it is inappropriate to allow an employee to take into account a
chapter 1 tax credit that the taxpayer has otherwise requested to be
refunded by filing an IRS form other than the employee's individual
income tax return.
c. Estimated Tax Payments
 The Treasury Department and the IRS have determined that certain
estimated tax payments are ``other items'' referenced in section
3402(m)(3) because employees who have both wages and non-wage income,
including net earnings from self-employment, should be able to take
into account any estimated tax payments they already paid with respect
to non-wage income if they want to have income tax withheld from their
wages for the remainder of the year to apply toward tax liability with
respect to non-wage income for that year. The Treasury Department and
the IRS also want to ensure employees do not use estimated tax payments
to inappropriately reduce required withholding on wages. Accordingly,
these proposed regulations allow taxpayers to take into account, in
determining the additional withholding allowance or other reductions in
withholding under section 3402(m)(3), estimated tax payments paid to
date if (1) the amount claimed has been paid with the payment voucher
from Form 1040-ES, ``Estimated Tax for Individuals'' (or was otherwise
designated by the taxpayer as a payment of estimated tax); (2) the
employee uses the Tax Withholding Estimator and enters the amount
claimed pursuant to the instructions in the Tax Withholding Estimator;
and (3) in using the Tax Withholding Estimator, the employee includes
all items of nonwage income the Tax Withholding Estimator prompts the
employee to enter.\15\ As a result,
[[Page 8354]]
employees who desire to satisfy their tax obligations related to self-
employment and other non-wage income through wage withholding rather
than future estimated tax payments may use the Tax Withholding
Estimator to compute the amount necessary to do so. Employees who
desire to continue to pay estimated taxes in whole or in part on self-
employment or other non-wage income, should not use the Tax Withholding
Estimator, but should follow the instructions in Publication 505 to
determine how to complete Form W-4. The Treasury Department and the IRS
request comments on whether employees should be able to take into
account in the Tax Withholding Estimator estimated tax payments they
have not yet made but plan to make during the calendar year with regard
to their non-wage income and, if so, what conditions are advisable to
ensure employees do not shift required withholding on wages to
estimated tax payments or inadvertently pay insufficient taxes during
the calendar year so that they owe taxes when they file their tax
returns and possibly face estimated tax or underpayment penalties.
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 \15\ An employee subject to a lock-in letter may not take
estimated tax payments into account.
---------------------------------------------------------------------------
d. Definitions and Special Rules
 These proposed regulations continue the rules in Sec. 31.3402(m)-
1(c)(1) of the current regulations relating to the circumstances under
which an employee may take into account, in determining the employee's
additional withholding allowance or other reductions in withholding
under section 3402(m), deductions, credits, and other items.
Specifically, an employee may generally take into account only a
particular deduction or credit (other than the credit for income tax
withheld on wages) that the employee reasonably expects will be
allowable for the year the estimation is made, which in no event may
exceed the amount shown for that particular deduction or credit on the
employee's tax return for the preceding taxable year plus a
determinable additional amount. However, these proposed regulations
provide that a taxpayer may not take into account any proposed
adjustment relating to a disallowed tax deduction or credit that is the
subject of any pending request for reconsideration, protest, request
for consideration by an Appeals office, or civil action.
 These proposed regulations partially incorporate the rule in the
flush language of Sec. 31.3402(m)-1(b) of the current regulations to
provide that an employee must offset any deduction allowable under
proposed Sec. 31.3402(m)-1(b) with items includible in the employee's
gross income for which no Federal income tax is withheld. However,
unlike the rule in the flush language of Sec. 31.3402(m)-1(b) of the
current regulations, the rule in the proposed regulations is applied
only with respect to deductions and not with respect to income tax
credits. The Treasury Department and the IRS have determined that
requiring taxpayers to apply this rule with respect to credits is
mathematically cumbersome and would complicate withholding procedures
for employees. In order to offset tax credits with nonwage income,
employees would have to convert the credit to a deduction, and the
Treasury Department and the IRS view such a procedure as undercutting
the purpose of the 2020 Form W-4, which in separate steps requests
dollar amounts for estimated tax credits and estimated deductions,
facilitating determination of more accurate withholding. The Treasury
Department and the IRS request comments with respect to this rule.
 These proposed regulations also incorporate the rules in Sec.
31.3402(m)-1(f) of the current regulations and provide that an employee
may not take into account, in determining the employee's additional
withholding allowance or other reductions in withholding under section
3402(m), deductions, credits, or estimated tax payments if these
deductions, credits, or estimated tax payments are claimed on another
valid Form W-4 in effect with respect to another employer of the
employee or an employer of the employee's spouse. These proposed
regulations provide that spouses who file jointly may only claim
deductions, credits, or estimated tax payments once, but these amounts
may be allocated between the spouses. These proposed regulations also
provide that a married employee who expects to file separately from his
or her spouse and has filed separately for the preceding taxable year
may take into account deductions, credits, or estimated tax payments on
the basis of the employee's individual wages and allowable items. These
proposed regulations further provide that an employee must follow the
instructions to the Form W-4, and other forms, instructions,
publications, and related guidance in determining the credits,
deductions, or estimated tax payments the employee may take into
account under section 3402(m). This is similar to the rule in Sec.
31.3402(m)-1(d)(1) of the current regulations, which instructs
taxpayers to compute additional allowances using the tables and
instructions on Form W-4. Finally, these proposed regulations delete
the examples illustrating the application of section 3402(m) and the
current regulations. The Treasury Department and the IRS request
comments on the need for examples that illustrate the application of
these proposed regulations.
8. Furnishing of Withholding Allowance Certificates
 As stated earlier in this preamble, these proposed regulations
implement TCJA's changes to section 3402(f)(2) of the Code and conform
to the redesigned 2020 Form W-4. These proposed regulations also
address the circumstances under which the employee must furnish the
employer a Form W-4. Under section 3402(f)(2), in no event may the
employee furnish the employer a withholding allowance certificate
claiming a withholding allowance in excess of the withholding allowance
the employee is entitled to claim under section 3402(f)(1).
 In addition, these proposed regulations restate and clarify certain
longstanding special rules relating to when an employer should request
each employee to furnish a new Form W-4, rules relating to inclusion of
social security numbers on a Form W-4, and rules relating to invalid
Forms W-4. Finally, these proposed regulations clarify longstanding
rules relating to the submission of certain Forms W-4 to the IRS and
rules governing when the IRS may notify the employer in writing that an
employee is not entitled to claim a complete exemption from withholding
or more than the maximum withholding allowance specified by the IRS in
a written notice (a lock-in letter).
a. Commencement of Employment
 Under section 3402(f)(2)(A), on or before the commencement of
employment with an employer, an employee must furnish the employer with
a signed withholding allowance certificate relating to the withholding
allowance claimed by the employee, which in no event may exceed the
withholding allowance to which the employee is entitled. These proposed
regulations clarify section 3402(f)(2)(A) and provide that, on or
before commencement of employment, an employee must furnish the
employer with a signed Form W-4 relating to the filing status the
employee reasonably expects to claim on the employee's income tax
return and the withholding allowance the employee is entitled to as
discussed in section 6 of this Explanation of Provisions. These
proposed regulations clarify that an employee may in no event furnish a
[[Page 8355]]
Form W-4 claiming a withholding allowance in excess of the withholding
allowance the employee is entitled to as determined based on the
employee's reasonable expectations and the instructions provided in
forms, instructions, publications, and other guidance prescribed by the
IRS.
 These proposed regulations also clarify that an employee who may
claim exemption from withholding under section 3402(n) and proposed
Sec. 31.3402(n)-1 may furnish a Form W-4 claiming the exemption from
withholding on or before commencement of employment with an employer.
 As stated in section 5 of Notice 2018-92, because TCJA struck
section 3401(e) but did not make any substantive changes to section
3402(l) (providing that an employee is treated as single unless the
employee furnishes the employer a Form W-4 indicating the employee is
married), these proposed regulations provide, with respect to wages
paid on or after January 1, 2020, that an employer with an employee who
failed or fails to furnish a valid Form W-4 on or before commencing
employment with the employer must treat the employee as single but
having the withholding allowance provided in forms, instructions,
publications, and other guidance prescribed by the IRS (default rate).
This rule provides flexibility to adjust the applicable default rate of
withholding, if warranted based on future legislation or statistical
data, to better align withholding with income tax liability.
 The IRS plans to provide a default rate for employees who fail to
furnish a Form W-4 and who commenced employment on or before December
31, 2019 (and were paid wages in 2019 or earlier) that differs from the
default rate for employees who fail to furnish a Form W-4 and were
first paid wages on or after January 1, 2020. However, for this
purpose, for any employee commencing employment on or after January 1,
2020, in determining when the employee was first paid wages, the
employer may choose to disregard any previous payment of wages during a
prior employment relationship between the employee and the employer
that had ended, such as for an employee who retired and is later
rehired. In this circumstance, the employer may treat the employee who
fails to furnish a Form W-4 as though the employee was first paid wages
on or after January 1, 2020.
 Employees hired and paid wages on or before December 31, 2019, who
failed to furnish Forms W-4 have historically been treated as single
and claiming zero withholding allowances. This default rate will
continue to apply to these employees hired and paid wages on or before
December 31, 2019, who fail to furnish a valid Form W-4. As a result
employees in this situation would generally have a similar amount of
income tax withheld from wages in 2020 as in 2019 (although the 2020
Publication 15-T provides percentage method and wage bracket method
withholding tables that take into account 2020 cost-of-living
adjustments to certain items due to inflation as required by various
provisions of the Code).
 On the other hand, Publication 15-T instructs employers to treat an
employee who is first paid wages on or after January 1, 2020 (even if
hired at the end of 2019), and who fails to furnish a Form W-4 as if
the employee had checked the box for single or married filing
separately in Step 1(c) and made no entries in Step 2, Step 3, or Step
4 of the 2020 Form W-4. Thus, a single filer's standard deduction with
no other entries for the steps on the 2020 Form W-4 will be taken into
account in determining withholding for the employee. The tables and
computational instructions in Publication 15-T were adjusted
accordingly. The Treasury Department and the IRS have determined that
this updated default rate of withholding adequately reflects the
appropriate withholding for most employees.
 However, if this updated default rate were applied to wages paid in
2020 or later to those employees who were hired and paid wages on or
before December 31, 2019, those employees would generally have less
income tax withheld from their wages paid in 2020 or later than they
did in 2019 and earlier without furnishing a new Form W-4 to their
employers. Thus, these employees might be surprised by such an
unexpected change in withholding when they took no action to cause the
change in withholding. The Treasury Department and the IRS note that if
an employee desires and is entitled to have less tax withheld from the
employee's wages, the employee should furnish his or her employer a
valid Form W-4 (and employees will more easily achieve accurate
withholding using the 2020 Form W-4). Accordingly, while the updated
default rate for employees first paid wages on or after January 1,
2020, will lead to more accurate withholding than the continued default
rate for employees hired and paid wages on or before December 31, 2019,
the Treasury Department and the IRS view the use of separate default
rates depending on when the employee commenced employment and first
received wages as appropriately balancing the desire for accurate
withholding and the desire to not reduce withholding for employees with
no change in circumstance or newly furnished Form W-4.
 Section 11 of Notice 2018-92 solicited comments generally, and one
commenter suggested that an employee who fails to furnish a Form W-4
should continue to be treated as single with zero withholding
allowances because adding allowances to the employee's wages
complicates the withholding system. The Treasury Department and the IRS
do not agree that adding withholding allowances complicates the
withholding system, especially after implementation of the redesigned
2020 Form W-4. Recognizing that the goal of the withholding system is
to achieve the appropriate withholding of income tax to approximate an
employee's income tax liability, the proposed regulations provide that
employees who fail to furnish Form W-4 will be treated as single having
the withholding allowance provided in forms, instructions,
publications, or other guidance by the IRS. Withholding on these
employees' wages takes into consideration statistical data concerning
the tax liability of employees and is designed to avoid placing an
unnecessary burden on employers. Thus, Treasury Department and the IRS
will not adopt this specific comment
b. Change of Status
 Similar to the current regulations, these proposed regulations
provide ``change of status'' rules for employees who experience changed
circumstances that reduce the withholding allowance an employee is
entitled to claim. In particular, these proposed regulations update the
rules to reflect TCJA changes and changes in computational procedures
set forth in forms, instructions and publications. See section
3402(f)(2)(B) and (C). As required by the Code, these proposed
regulations provide that an employee is generally required to furnish a
new Form W-4 to his or her employer within 10 days after the change of
status if the change affects the current calendar year or by December 1
of the current calendar year to take effect in the following calendar
year if the change affects the next calendar year. Due to the TCJA
change in the definition of a withholding allowance and to reflect the
goal of the withholding system to ensure the tax withheld approximates
the employee's income tax liability while minimizing employee and
employer burden, these proposed regulations provide that an employee
does not have
[[Page 8356]]
to furnish a new Form W-4 if the amount of tax the employee expects to
be withheld from the employee's pay for the calendar year is greater
than the amount of the employee's anticipated income tax liability.
 Furthermore, because this general rule may be difficult for certain
employees to apply and because the 2020 Form W-4 generally uses annual
estimates of dollar amounts, the IRS and the Treasury Department have
determined that requiring employees to furnish, and employers to put
into effect, new Forms W-4 for small changes in circumstances would be
burdensome and complex. Therefore, these proposed regulations also
provide a de minimis rule with respect to changes of status under
section 3402(f)(2)(B) and (C). These change of status rules apply for
Forms W-4 furnished in 2019 or prior years and for Forms W-4 furnished
in 2020 or later years.
 Specifically, these proposed regulations provide seven
circumstances under which an employee must furnish a new Form W-4 to
the employer. If any of the seven circumstances apply, the employee
experiences a ``change of status'' and must, within 10 days after the
change occurs (if the change of status affects the current calendar
year) or by the later of December 1 of the current calendar year or 10
days after the change occurs (if the change of status affects the next
calendar year), furnish his or her employer with a new Form W-4.
Notwithstanding a change in status, however, if the employee's income
tax withholding for the calendar year would continue to equal or exceed
the employee's anticipated income tax liability for the year, then the
employee generally does not have to furnish a new Form W-4 to the
employer.\16\
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 \16\ However, any employee whose anticipated filing status
changes from married filing jointly (or qualifying widow(er)) to
head of household or single (including married filing separately) or
from head of household to single (including married filing
separately) must furnish a new Form W-4 to take effect in the
following calendar year to his or her employer by the later of
December 1 of the calendar year in which the change occurs, or
within 10 days of the change.
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 First, if an employee's filing status changes from married filing
jointly (or qualifying widow(er)) to head of household or single
(including married filing separately) or from head of household to
single (including married filing separately), the proposed regulations
provide that the employee experiences a change of status.
 Second, if an unmarried employee commences concurrent employment
with a second employer that pays wages subject to income tax
withholding and selects higher withholding rate tables on the second
Form W-4, the proposed regulations provide that the employee
experiences a change of status with respect to the first Form W-4 if
higher withholding rates were not selected on the first Form W-4.
Similarly, if a married employee (1) expects to file jointly with his
or her spouse, (2) no longer has only one Form W-4 on file for the
employee, the employee's spouse, or both, and (3) the employee or the
employee's spouse selects higher withholding rate tables on a second
Form W-4, then the employee experiences a change of status with respect
to the first Form W-4 if higher withholding rate tables were not
selected on the first Form W-4. The higher withholding rate tables are
designed to work for employees with two employers (including married
employees filing jointly if both spouses are employed by employers who
pay wages subject to income tax withholding). Employees with two Forms
W-4 in effect who select higher withholding rate tables on one Form W-4
without selecting higher withholding rate tables on the second Form W-4
have a significant risk of having less than the amount necessary to
satisfy their tax liability withheld from their wages.
 Third, if an employee has multiple Forms W-4 in effect, and the
employee or the employee's spouse reasonably expects an annual increase
in regular wages of $10,000, the proposed regulations provide that a
change of status occurs with respect to the Form W-4 on which the
employee has utilized the multiple job procedures (other than selecting
higher withholding rate tables) set forth in forms, instructions,
publications, and other guidance. For this purpose, the proposed
regulations indicate that ``regular wages'' means wages paid by an
employer for a payroll period either at a regular periodic rate (e.g.,
daily, hourly) or at a predetermined fixed amount. The Treasury
Department and the IRS anticipate that this change of status rule will
promote accuracy in withholding without imposing unnecessary burden in
requiring new Forms W-4 for smaller changes in regular wages. As in
prior years, in 2020, the income tax withholding tables in Publication
15-T do not adequately account for increases in regular wages for
employees who utilize the multiple job procedures (other than selecting
higher withholding rate tables) because these wages may be subject to a
higher marginal rate of income tax on the employee's income tax return.
 Fourth, if an employee claims a child tax credit on a Form W-4 and
expects the number of qualifying children with respect to whom a child
tax credit was claimed to decrease, the proposed regulations provide
that the employee experiences a change of status with respect to the
Form W-4 on which the child tax credit was claimed.
 Fifth, if an employee has claimed any tax credit, including a child
tax credit, and the amount of tax credits the employee reasonably
expects to claim decreases by more than $500, the proposed regulations
provide that the employee experiences a change of status with respect
to the Form W-4 on which these tax credits are claimed.
 Sixth, the proposed regulations provide that an employee
experiences a change of status with respect to deductions the employee
reasonably expects to claim (such as itemized deductions in excess of
the basic standard deduction corresponding to the employee's claimed
filing status) if the employee reasonably expects the deductions
claimed on the employee's tax return to decrease by more than $2,300.
 The Treasury Department and the IRS anticipate that these dollar
thresholds for requiring a new Form W-4 will account for decreases in
credits and deductions and will promote accuracy in the withholding
system. Indeed, these threshold amounts for requiring a new Form W-4
will lead to more accuracy than the change of status rules in the
current regulations that are in effect for 2019, which turn on the
value of one allowance that historically has been tied to the pre-TCJA
personal exemption amount, which for 2019 is $4,200.\17\ Accordingly,
this proposed change of status rule should help make withholding more
accurate and thereby decrease the risk of underwithholding for
employees.
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 \17\ Under section 3 of Notice 2018-92, an employee would
experience a change of status if the employee's claimed deductions
decrease by more than $4,200 or if the employee's claimed tax
credits decrease by as much as $1,554 (i.e., assuming the individual
is taxed at the highest marginal tax rate in section 1(j) of 37%,
the maximum benefit from a tax credit equivalent to $4,200 in
deductions is $1,554).
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 Seventh, an employee experiences a change of status under the
proposed regulations if he or she no longer reasonably expects to be
able to claim exemption from withholding under section 3402(n) and
proposed Sec. 31.3402(n)-1. This change can occur if the employee
expects to incur an income tax liability under subtitle A for either
the current or the previous calendar year.
 Finally, similar to the rule in Sec. 31.3402(f)(2)-1(b)(2) of the
current
[[Page 8357]]
regulations, these proposed regulations provide that if an employee
experiences a change of status that increases the employee's
withholding allowance, the employee may furnish the employer with a new
Form W-4 claiming the increased withholding allowance the employee is
entitled to claim under proposed Sec. 31.3402(f)(1)-1(b). Like Sec.
31.3402(f)(2)-1(b)(3) of the current regulations, these proposed
regulations also provide that if, on any day during the calendar year,
the employee may claim exemption from withholding under section 3402(n)
and proposed Sec. 31.3402(n)-1, the employee may furnish the employer
with a new Form W-4 claiming exemption from withholding.
c. Special Rules Relating to Withholding Allowance Certificates
 These proposed regulations provide that employers should request
each employee to furnish a new Form W-4 for the next calendar year
before December 1 of each year, in the event of a change to an
employee's withholding allowance. A similar rule is in Sec.
31.3402(f)(2)-1(c)(3) of the current regulations, which states that
employers should request each employee to furnish a new Form W-4. These
proposed regulations update the current ``exemption status''
nomenclature to ``withholding allowance,'' which is defined in proposed
Sec. 31.3402(f)(1)-1(b).
 These proposed regulations provide that an employee must include
the employee's social security number on the signed Form W-4 the
employee furnishes to the employer. An employee may not use a truncated
social security number in completing the employee's Form W-4 because a
person may not truncate his or her own taxpayer identification number
on any statement or document the person furnishes to another person.
See Sec. 301.6109-4(b)(2)(iv). A similar rule is set forth in Sec.
31.3402(f)(2)-1(d) of the current regulations.
 These proposed regulations continue the rule that any alteration or
unauthorized addition to a Form W-4 causes a Form W-4 to be
invalid.\18\ In addition, any oral or written statement clearly
indicating that an employee's Form W-4 is false that an employee makes
to the employer on or before the date on which the employee furnishes
the Form W-4 causes the employee's Form W-4 to be invalid. An employer
that receives an invalid Form W-4 must disregard the invalid Form W-4
for purposes of computing withholding. The employer must inform the
employee that the Form W-4 is invalid and must request another Form W-4
from the employee. If the employee fails to comply with the employer's
request the employer must withhold according to the employee's last
valid Form W-4 in effect. If no valid Form W-4 is in effect, the
employer must treat the employee as single but having the withholding
allowance provided by the forms, instructions, and publications
prescribed by the IRS. This treatment is consistent with default rates
described in section 8(a) of this Explanation of Provisions that apply
if an employee fails to furnish a valid W-4 upon commencement of
employment.
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 \18\ Similar to the rule in the current regulations, proposed
Sec. 31.3402(f)(5)-1(b)(1) provides that an alteration of a Form W-
4 is any deletion of the language of the jurat or other similar
provision of the Form W-4 by which the employee certifies or affirms
the correctness of the completed Form W-4, or any material defacing
the Form W-4. Proposed Sec. 31.3402(f)(5)-1(b)(2) provides that an
unauthorized addition to a Form W-4 is any writing on the Form W-4
other than the entries requested on the Form W-4 (e.g., name,
address, and filing status) or permitted by instructions or other
guidance.
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 These proposed regulations remove Sec. 31.3402(f)(2)-1(f) of the
current regulations, which provides that the withholding exemption
certificate shall be used for purposes of withholding with respect to
qualified State individual taxes, as well as Federal Tax. Section
31.3402(f)(2)-1(f) relates to a subchapter of the Code that was
repealed by section 11801(a)(45) of Title XI of the Omnibus Budget
Reconciliation Act of 1990, Public Law 101-508, 104 Stat. 1388-522
(repealing Subchapter E of Chapter 64).
d. Submission of Certain Withholding Allowance Certificates
 These proposed regulations continue the rule in the current
regulations regarding the submission of withholding exemption
certificates to the IRS but update any reference to ``withholding
exemption certificate'' to ``withholding allowance certificate''. Under
these proposed regulations, the IRS may, by written notice or through
published guidance in the IRB, request submission of a Form W-4.\19\
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 \19\ Separate procedures apply to examination of returns, which
are further discussed in Sec. 601.105.
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e. Notice of Maximum Withholding Allowance Permitted
 These proposed regulations continue the rule from the current
regulations regarding the notice prescribing the maximum number of
withholding exemptions an employee may claim (a lock-in letter) but
update any reference to ``maximum number of withholding exemptions
permitted'' to ``maximum withholding allowance.'' This change is
consistent with TCJA's changes to section 3402(f)(1). In addition,
these proposed regulations replace the term ``marital status'' with an
employee's ``filing status.'' These proposed regulations also replace
references to ``number of exemptions'' with ``withholding allowance''
to implement TCJA's changes to section 3402(f)(1).
 These proposed regulations are consistent with section 3 of Notice
2019-92, which provided that, until further guidance is issued, any
reference to a withholding exemption in the regulations and guidance
under section 3402 is applied as if it were a reference to a
withholding allowance.\20\ Proposed Sec. 31.3402(f)(1)-1(b) prescribes
the withholding allowance an employee is entitled to, and, therefore,
the maximum withholding allowance the employee is entitled to is based
on that definition. Correspondingly, the IRS and the Treasury
Department have determined that the notices issued under Sec.
31.3402(f)(2)-1(g)(2), including a lock-in letter or a modification
notice, which the IRS may issue subsequently to a lock-in letter to
modify an employee's filing status and/or permitted withholding
allowance, will be updated to reflect the 2020 Form W-4 withholding
procedures. These proposed regulations update the reference to the
withholding allowance certificate if an employee subject to a lock-in
letter requests more withholding or requests less withholding to
correspond to proposed Sec. 31.3402(f)(1)-1(b) (defining the
withholding allowance to which the employee is entitled), Sec.
31.3402(i)-1(a)(1) and (2) (providing for voluntary increases in the
amount of withholding not otherwise required under section 3402), and
proposed Sec. 31.3402(l)-1(b) (providing for the filing status an
employee may claim on the Form W-4). If an employer is required to
apply a maximum withholding allowance prescribed by a lock-in letter or
modification notice, and the employee subsequently furnishes the
employer a new Form W-4, the employer must put this new Form W-4 into
effect only if it requires the employer to withhold more income tax
than prescribed by the lock-in letter or modification notice. If the
new Form W-4 would result in less income tax being withheld from the
employee's
[[Page 8358]]
wages, the employer may not put the Form W-4 into effect.
---------------------------------------------------------------------------
 \20\ Section 3 of Notice 2018-92 further provides, as an
example, that the language in Sec. 31.3402(f)(2)-1(g)(2)(i)
providing for an IRS notification process to specify a ``maximum
number of withholding exemptions'' an employee may claim will be
applied as a reference to a maximum number of withholding
allowances.
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 Consistent with section 9 of Notice 2018-92, these proposed
regulations eliminate the requirement that the employer send a written
response to the IRS office designated in the lock-in letter that the
employee is not employed by the employer. Notices issued under Sec.
31.3402(f)(2)-1(g)(2) will continue to provide that if an employer no
longer employs an employee, no action is required. These proposed
regulations also include minor non-substantive changes with regard to
the lock-in letter.
 Finally, these proposed regulations provide for three special rules
in determining the withholding allowance for employees who are subject
to a lock-in letter or who request that the IRS issue a modification
notice to modify a lock-in letter. First, the anticipated tax benefit
from any tax credit or deduction must be offset by the anticipated tax
attributable to items includible in the employee's gross income in the
manner determined by the IRS. Second, the section 31(a) credit may not
be taken into account. Third, estimated tax payments may not be taken
into account. The Treasury Department and the IRS have determined that
these special rules are appropriate because taxpayers subject to a
lock-in letter have been significantly noncompliant with wage
withholding rules and requirements for payment of income tax liability.
Moreover, these rules will generally be applied by the IRS in preparing
any modification notice, once such notices have been revised to
incorporate the 2020 Form W-4 withholding procedures, and thus concerns
that apply to other employees regarding the complexity of these
computations do not apply to employees subject to a lock-in letter.
9. When a Withholding Allowance Certificate Takes Effect
 Section 31.3402(f)(3)-1 of the current regulations was last updated
in 1983 by T.D. 7915, 48 FR 44072-01 (September 27, 1983). These
proposed regulations update the regulations under section 3402(f)(3) to
reflect the statutory rules enacted in section 10302 of the Omnibus
Reconciliation Act of 1987, Public Law 100-203, 101 Stat. 1330, 1330-
429 (1987). As noted in section 2, above, these rules apply to
withholding exemption certificates, and any reference to withholding
allowance certificates or Forms W-4 includes a reference to a
withholding exemption certificate, furnished and effective on or before
December 31, 2017.
 Specifically, section 3402(f)(3)(A) provides that when there is no
withholding allowance certificate in effect for a particular employee,
and the employee furnishes a withholding allowance certificate to the
employer, the employer must put the certificate into effect as of the
beginning of the first payroll period ending after the date the
certificate is furnished. If the payment of wages is made without
regard to a payroll period, the employer must put the withholding
allowance certificate into effect as of the first payment of wages
after it is furnished. These proposed regulations reiterate the
statutory rule.
 Under section 3402(f)(3)(B), if the employer has a valid
withholding allowance certificate in effect with respect to a
particular employee, and the employee furnishes a withholding allowance
certificate to take effect during the calendar year, the employer must
put the certificate into effect as of the beginning of the first
payroll period ending (or the first payment of wages made without
regard to a payroll period) on or after the 30th day after the day on
which the certificate is furnished. An employer may elect to put a
withholding allowance certificate into effect earlier but no earlier
than on or after the day the withholding allowance certificate is
furnished. An employer may not put into effect a withholding allowance
certificate furnished to take effect in the next calendar year under
section 3402(f)(2)(C) until the next calendar year. These proposed
regulations reiterate these statutory rules.
10. Period During Which Withholding Exemption Certificates Remain in
Effect
 The proposed regulations remove Sec. 31.3402(f)(4)-1 of the
current regulations, which applies to withholding exemption
certificates furnished prior to January 1, 1982. Generally, withholding
exemption or allowance certificates continue in effect until replaced
by a new Form W-4. The Treasury Department and the IRS have determined
that the rules discussed in section 11 of this Explanation of
Provisions are sufficient to account for Forms W-4 in effect under
prior law.
11. Effective Period of a Withholding Allowance Certificate
 Similar to the current regulations, the proposed regulations
provide that Forms W-4 that took effect under prior law generally
remain in effect until another Form W-4 is furnished. See section
3402(f)(4). This applies with respect to withholding exemption
certificates and Forms W-4 furnished on or before December 31, 2019,
including those that are in effect on December 31, 2019, that have not
been superseded by a new Form W-4 furnished to be effective for 2020 or
subsequent years. However, under these proposed regulations, a Form W-4
furnished by an employee subject to a lock-in letter ceases to be
effective when the lock-in letter takes effect unless the Form W-4
results in more withholding than prescribed by the lock-in letter. If
the employee's Form W-4 results in more withholding than prescribed by
the lock-in letter, the employer should continue withholding according
to the employee's Form W-4, even after the employee is released from
the lock-in letter. If the employer had been withholding according to a
lock-in letter, upon the employee's release from the lock-in letter,
the proposed regulations provide that the employee must furnish his or
her employer a new valid Form W-4 in order to ensure that withholding
after release from the lock-in letter is as accurate as possible. If
the employee fails to do so, the employee will be treated as single but
having the withholding allowance provided in forms, instructions,
publications, and other guidance prescribed by the Commissioner, in
accordance with Sec. 31.3402(f)(2)-1(a)(4). Accordingly, an employee
subject to a lock-in letter and subsequently released who does not
furnish a new Form W-4 would be treated as single or married filing
separately in Step 1(c) of the 2020 Form W-4 with no entries in Step 2,
Step 3, or Step 4 of the 2020 Form W-4, once withholding compliance
notices are modified for 2020 withholding procedures.
 These proposed regulations delete the cross reference in Sec.
31.3402(f)(4)-2(b) of the current regulations to the withholding
allowance under section 3402(m) because this cross-reference is
designed to highlight a distinction relevant to Forms W-4 furnished
before 1982. Even though this distinction is no longer relevant, these
proposed regulations continue the general rule in the current
regulations and provide that an employee who claims deductions,
credits, or other items under section 3402(m) must furnish a new Form
W-4 when he or she experiences a change of status to which the rules
under proposed Sec. 31.3402(f)(2)-1(b) (change of status that affects
the current calendar year) or proposed Sec. 31.3402(f)(2)-1(e) (change
of status that affects the next calendar year) apply.
 These proposed regulations continue the rule of the current
regulations and provide that Forms W-4 that claim exemption from
withholding under section 3402(n) generally are effective up to and
including February 15 of the
[[Page 8359]]
following year, and an employer may continue to rely on an employee's
Form W-4 claiming exemption from withholding until February 16 of the
following year. See section 3402(n) (providing in flush language that
the Secretary shall by regulations provide for the coordination of the
provisions of section 3402(n) and section 3402(f)). However, these
proposed regulations provide that if a Form W-4 claiming exemption from
withholding expires, and the employee does not furnish a valid Form W-4
either renewing his or her exemption or claiming a withholding
allowance, the employer must treat the employee as single but having
the withholding allowance provided in forms, instructions,
publications, and other guidance prescribed by the IRS. Unlike the
current regulations, these proposed regulations do not require the
employer to put into effect a previously furnished valid Form W-4 when
an employee's Form W-4 claiming exemption from withholding expires.
 For 2020, Publication 15 instructs employers to treat employees who
claimed exemption from withholding in 2019 and who do not furnish a new
2020 Form W-4 as single or married filing separately in Step 1(c) of
the 2020 Form W-4 with no entries in Step 2, Step 3, or Step 4 of the
2020 Form W-4. This treatment is consistent with default rates
described in section 8(a) of this Explanation of Provisions that apply
if an employee fails to furnish a Form W-4 upon commencement of
employment.
12. Form and Contents of Withholding Allowance Certificates
 These proposed regulations provide that the withholding allowance
certificate required to be furnished under section 3402(f)(2) is the
Form W-4. The Form W-4 is called the ``Employee's Withholding
Certificate.'' Previously, for years 1972 through 2019, the Form W-4
was called the ``Employee's Withholding Allowance Certificate.'' The
name of the form was changed for the 2020 revision because the Form W-4
is no longer based on a number of withholding allowances valued at a
particular dollar amount. Blank copies of paper Forms W-4 will be
supplied to employers upon request to the IRS. An employer may also
download and print Form W-4 from the IRS internet site at www.irs.gov.
These proposed regulations provide rules similar to Sec.
31.3402(f)(5)-1(a) of the current regulations relating to substitute
paper Forms W-4.
 These proposed regulations provide that, unless provided otherwise
in forms, instructions, publications, or other guidance prescribed by
the IRS, only the Form W-4 revision in effect for a calendar year may
be furnished by an employee in that calendar year and given legal
effect by the employer as a new Form W-4 or to replace a previously
furnished Form W-4. However, an employee may furnish the Form W-4
revision for the following calendar year in the current calendar year
to take effect for the following calendar year. These proposed
regulations provide an example illustrating this rule.
 The Treasury Department and the IRS have received questions from
payroll groups on the extent to which employers have to comply with
revenue procedures relating to substitute forms when providing paper
substitute Forms W-4 to employees. Rev. Proc. 2018-51, 2018-44 I.R.B.
721 (also published in Publication 1167, ``General Rules and
Specifications for Substitute Forms and Schedules'') applies to any
substitute paper Forms W-4. However, because the broader purpose of
Rev. Proc. 2018-51 and Publication 1167 is to provide guidance on forms
filed with the IRS, and the Form W-4 is generally not filed with the
IRS, the Treasury Department and the IRS request comments on whether
additional guidance is needed regarding substitute paper Forms W-4.
 These proposed regulations also provide rules similar to Sec.
31.3402(f)(5)-1(b) of the current regulations relating to invalid Forms
W-4. However, these proposed regulations replace any reference to
``withholding exemption certificate'' with a reference to the
``withholding allowance certificate'' because of TCJA's changes to
section 3402(f)(5) and clarify certain provisions. Under these proposed
regulations, an unauthorized addition to a Form W-4 is any writing on
the certificate other than the entries on the Form W-4 (e.g., name,
address, and filing status). An unauthorized addition does not include
entries on the Form W-4 permitted by the instructions or other
guidance. Thus, a 2020 Form W-4 with an entry ``Exempt'' on Form W-4 in
the space below Step 4(c) is not an unauthorized addition because this
entry is permitted by the 2020 Form W-4 instructions. Similarly, an
entry on the Form W-4 indicating an employee is a nonresident alien
individual is not an unauthorized addition because this entry is
permitted by Notice 1392, ``Supplemental Form W-4 Instructions for
Nonresident Aliens.'' The proposed regulations clarify, however, that
an entry claiming exemption from withholding that is accompanied by any
other entry on the Form W-4 (other than the employee's filing status)
that could potentially affect the amount of income tax withheld from
the employee's pay (i.e., an entry on Step 2, Step 3, or Step 4 of the
2020 Form W-4) is an unauthorized addition and, thus, a Form W-4 that
includes such an entry is invalid.
 In addition to all the rules under Sec. 31.3402(f)(5)-1(c) of the
current regulations related to electronic Form W-4 systems, these
proposed regulations provide that an employer that maintains an
electronic Form W-4 system for its employees to furnish Forms W-4
electronically must provide the employee with the same information as
the current version of the official IRS Form W-4 available on irs.gov
and must satisfy any requirements specified by the IRS in forms,
publications, and other guidance. These proposed regulations further
provide that an employer that maintains an electronic Form W-4 system
for its employees must provide the employees the ability to claim
exemption from withholding under section 3402(n) and must include the
two certifications described in proposed Sec. 31.3402(n)-1(a).
13. Withholding Exemptions for Nonresident Alien Individuals
 Section 3402(f)(6) provides that a nonresident alien individual
(other than an individual described in section 3401(a)(6)(A) or (B))
\21\ shall be entitled to only one withholding exemption. The Treasury
Department and the IRS have concluded that the withholding exemption
referenced in section 3402(f)(6) is the deduction allowed to the
nonresident alien individual under section 151, which for 2018-2025
means zero under section 151(d)(5). These proposed regulations include
this clarification.
---------------------------------------------------------------------------
 \21\ Although section 3402(f)(6) references section
3401(a)(6)(A) or (B), section 3401(a)(6) was amended so that there
are no longer separately enumerated subparagraphs (A) or (B). Thus,
this reference applies to section 3401(a)(6) and Sec.
31.3401(a)(6)-1 of the current regulations.
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 In addition, proposed Sec. 31.3402(f)(6)-1(a) provides that a
nonresident alien individual (other than a nonresident individual
treated as a resident under section 6013(g) and (h)) must follow
administrative guidance such as forms, instructions, publications, or
other guidance prescribed by the IRS that apply to the nonresident
alien individual's withholding. For 2020, nonresident alien individuals
should review and apply Notice 1392 to determine how to complete the
2020 Form W-4. Employers are instructed to apply special procedures in
Publication 15-T for these individuals. The application of the
procedures in the
[[Page 8360]]
2020 Publication 15-T depends on whether the nonresident alien
individual has furnished a Form W-4 on or after January 1, 2020.
14. Supplemental Wage Payments
 These proposed regulations provide that mandatory flat rate
withholding under Sec. 31.3402(g)-1(a)(2) is computed without regard
to any entries on a Form W-4, including the expanded entries on the
2020 Form W-4. In addition, optional flat rate withholding under Sec.
31.3402(g)-1(a)(7) applies without regard to any entries on the Form W-
4 other than the entry claiming exempt status. However, employers who
use the aggregate procedure for withholding on supplemental wages under
Sec. 31.3402(g)-1(a)(6) of the current regulations should take into
consideration the Form W-4 (including a 2020 Form W-4) furnished by the
employee.
15. Alternative Withholding Methods
 The proposed regulations eliminate the combined income tax
withholding and employee FICA tax withholding tables under Sec.
31.3402(h)(4)-1(b) of the current regulations. The Treasury Department
and the IRS announced their intention to eliminate these tables in
section 8 of Notice 2018-92. No comments were received on this issue.
As stated in section 8 of Notice 2018-92, although employers may
withhold a combined amount of income and FICA tax, employers must still
compute and report amounts of income tax and FICA tax separately on
quarterly or annual employment tax returns and Forms W-2. Though use of
the combined tables would generally reduce the number of computations
in determining the withholding from wages for an employer, this
difference in the number of computations has become less relevant with
the advance in computational technology since 1970 when these tables
were first provided.
 Moreover, the combined tables are not consistent with these
proposed regulations as applied to certain entries on the 2020 Form W-
4. Specifically, income tax must be withheld with respect to an
employee's entry in Step 4(a) (Other income) of the 2020 Form W-4,
which applies proposed Sec. 31.3402(i)-1(a)(2)(i). An employer must
reduce wages by an employee's entry in Step 4(b) (Deductions) of the
2020 Form W-4, which applies proposed Sec. 31.3402(m)-1(b). However,
neither the entry in Step 4(a) nor the entry on Step 4(b) impacts
employees' FICA tax liability under section 3101. Thus, an employer who
is furnished a Form W-4 with entries on either Step 4(a) or Step 4(b)
would not be able to use combined tables, which further diminishes the
usefulness of this alternative withholding procedure.
 Because section 8 of Notice 2018-92 announced the Treasury
Department's and the IRS' intent to remove the combined income tax
withholding and employee FICA tax withholding tables, this rule will be
proposed with an effective date of January 1, 2020. Accordingly, the
2020 version of Publication 15-T does not include combined income tax
withholding and employee FICA tax withholding tables. The Treasury
Department and the IRS again request comments on alternative
withholding procedures under section 3402(h) generally. However, the
Treasury Department and the IRS do not consider allowing employees to
base their withholding on a fixed dollar amount or percentage as
consistent with section 3402(a).
16. Additional Withholding
 These proposed regulations remove Sec. 31.3402(i)-1 of the current
regulations because this provision applies to agreements to withhold
additional amounts of Federal income tax, not otherwise required,
entered into before October 1, 1981. The Treasury Department and the
IRS request comments on whether this rule should be retained.
17. Increases in Withholding
 Section 3402(i) provides that the Secretary may by regulations
provide for increases in the amount of withholding in cases in which an
employee requests such changes. The current regulations express this
rule as an agreement to withhold ``an additional amount'' from the
employee's wages. See Sec. 31.3402(i)-1(a). This rule was consistent
with the format of Form W-4 for years prior to 2020 with respect to the
line requesting an additional amount to be withheld from each payment
of regular wages. To reflect the revised computational procedures on
the 2020 Form W-4, these proposed regulations provide that, for amounts
not otherwise required to be withheld from an employee's wages under
section 3402, in addition to specifying an additional amount to
withhold from the employee's wages, the employee may request that an
additional amount be added to the employee's wages on Form W-4, so that
the employer may withhold an additional amount of income tax resulting
from this addition under the computational procedures prescribed by the
IRS in forms, instructions, publications, and other guidance for the
calendar year for which the Form W-4 is in effect. In addition, these
proposed regulations provide that an employee may request an additional
amount, not otherwise required, to be withheld from the employee's
wages by selecting higher withholding rate tables.
 These proposed regulations also clarify the circumstances under
which the employer must comply with the employee's request. Employers
must generally comply with the employee's request on a valid Form W-4
after the employer has withheld all amounts otherwise required to be
withheld by Federal law (other than by amounts described in this
section), state law, and local law (other than by state or local law
that provides for voluntary withholding). The amounts withheld under
section 3402(i) are considered tax required to be withheld under
section 3402. Finally, these proposed regulations delete references to
decreases in withholding under section 3402(i) because of statutory
changes made in section 1581 of the Tax Reform Act of 1986, Public Law
99-514, 100 Stat 2085, 2766 (1987), which eliminated the option to
decrease withholding by a set dollar amount from section 3402(i).
18. Exemption From Withholding
 These proposed regulations add certain clarifying rules to the
rules in Sec. 31.3402(n)-1 of the current regulations concerning
claiming an exemption from withholding, and thereby propose to restore
in substance rules that were formerly in the regulations. See 26 CFR
31.3402(n)-1(2005). To qualify for the exemption provided by section
3402(n) for a taxable year, an employee must certify that the employee
incurred no liability for income tax imposed under subtitle A of the
Code for the employee's preceding taxable year, and that the employee
anticipates that he or she will incur no liability for income tax
imposed under subtitle A for the current taxable year. These proposed
regulations amend the current regulations to add a provision concerning
when the employee is considered to incur no liability for income tax
imposed under subtitle A. Specifically, Sec. 31.3402(n)-1(c) of these
proposed regulations provides that, for purposes of section 3402(n) and
Sec. 31.3402(n)-1 of the regulations, an employee is not considered to
incur liability for income tax imposed under subtitle A if the amount
of the tax is equal to or less than the total amount of credits against
the tax that are allowable to the employee under chapter 1, other than
the credits allowable under section 31 or 34. Proposed Sec.
31.3402(n)-1(c) also provides that, for purposes of section 3402(n) and
Sec. 31.3402(n)-1, an
[[Page 8361]]
employee who files a joint return under section 6013 is considered to
incur liability for any tax shown on that return. These proposed
regulations provide that an employee who is entitled to file a joint
return under section 6013 shall not certify that the employee
anticipates that he or she will incur no liability for income tax
imposed by subtitle A for the employee's current taxable year if the
statement would not be true in the event the employee files a joint
return for the year, unless the employee filed a separate return for
the preceding taxable year and anticipates that he or she will file a
separate return for the current taxable year.
 The rule concerning incurring liability for income tax imposed by
Subtitle A and the rule concerning joint returns were in the
regulations before 2006 (see 26 CFR 31.3402(n)-1(2005)) but were
deleted by T.D. 9276, 71 FR 42049 (July 26, 2006). This deletion did
not indicate a change in position by the Treasury Department and the
IRS, and the position of the Treasury Department and the IRS on these
issues has remained the same as reflected in Publication 505 for each
year from 2007 through 2019. Restoring the rules to the regulations is
intended to provide additional clarity and guidance as to the Treasury
Department and the IRS position on these issues.
Proposed Applicability Date
 The amendments set forth in this notice of proposed rulemaking are
generally proposed to apply on the date of publication of a Treasury
Decision adopting these rules as final regulations in the Federal
Register. Taxpayers may rely on the rules set forth in this notice of
proposed rulemaking, in their entirety, until the date a Treasury
Decision adopting these regulations as final regulations is published
in the Federal Register. However, proposed Sec. 31.3402(f)(2)-1(g)
relating to withholding compliance is proposed to apply as of the date
the notice of proposed rulemaking is published in the Federal Register,
proposed Sec. 31.3402(f)(5)-1(a)(3) regarding the requirement to use
the current version of Form W-4 is proposed to apply as of 30 days
after the date the notice of proposed rulemaking is published in the
Federal Register, and the proposed removal of Sec. 31.3402(h)(4)-1(b)
relating to the combined income tax withholding and employee FICA tax
withholding tables is proposed to apply on and after January 1, 2020.
Except with regard to the removal of Sec. 31.3402(h)(4)-1(b), the
proposed regulations provide that, under section 7805(b)(7), taxpayers
may choose to apply the rules therein on or after January 1, 2020.
Paperwork Reduction Act
 Any collection of information associated with this notice of
proposed rulemaking has been submitted to the Office of Management and
Budget for review under OMB control number 1545-0074 in accordance with
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). In general,
the collection of information is required under Sec. 3402 of the
Internal Revenue Code (the Code). The Treasury Department and the IRS
request comments on all aspects of information collection burdens
related to these proposed regulations, including estimates for how much
time it would take to comply with the paperwork burdens described in
OMB control number 1545-0074 and ways for the IRS to minimize the
paperwork burden. An agency may not conduct or sponsor and a person is
not required to respond to a collection of information unless it
displays a valid OMB control number.
Special Analyses
I. Regulatory Planning and Review
 This regulation is not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Department of the Treasury and the Office of
Management and Budget regarding review of tax regulations.
II. Regulatory Flexibility Act
 Under the Regulatory Flexibility Act (RFA) (5 U.S.C. chapter 6), it
is hereby certified that these proposed regulations, if adopted, would
not have a significant economic impact on a substantial number of small
entities that are directly affected by the proposed regulations. The
proposed regulations will apply to all employers that have an income
tax withholding obligation and, therefore, are likely to affect a
substantial number of small entities. Although the proposed regulations
are likely to affect a substantial number of small entities, the
economic impact of the regulations will not be significant.
 These proposed regulations do not independently impact employers or
employees because these regulations support both the 2019 and 2020 Form
W-4 and related withholding procedures, and employees are not required
to furnish a new Form W-4 solely because of the redesign of the Form W-
4. Employees who have a Form W-4 on file with their employer from years
prior to 2020 generally will continue to have their withholding
determined based on that form. These proposed regulations incorporate
the changes made by TCJA to sections 3401 and 3402 and conform the
regulations to provide flexible and administrable rules for income tax
withholding from wages to implement the 2020 Form W-4 and its related
tables and computational procedures described in Publication 15-T, and
to work with Forms W-4 provided in 2019 and earlier years. Any economic
impact on small entities that have an income tax withholding obligation
is generally a result of the change in underlying substantive tax rules
which led to revisions in the method of computing withholding, not
these proposed regulations. Because the proposed regulations preserve
the option of continuing to use old Forms W-4 for existing employees
who have not had significantly changed circumstances, the proposed
regulations minimize impact of the statutory changes on employers,
including small entities. Accordingly, Treasury and the IRS certify
that this proposed rule will not have a significant economic impact on
a substantial number of small entities pursuant to the Regulatory
Flexibility Act (5 U.S.C. chapter 6). Notwithstanding this
certification, the Treasury Department and the IRS invite comments on
any impact this rule would have on small entities.
 Pursuant to section 7805(f), this notice of proposed rulemaking has
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
III. Unfunded Mandates Reform Act
 Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditures in any one year by a
state, local, or tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. This rule does not include any Federal mandate that may
result in expenditures by state, local, or tribal governments, or by
the private sector in excess of that threshold.
IV. Executive Order 13132: Federalism
 Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial, direct compliance costs on state and local
governments, and is not
[[Page 8362]]
required by statute, or preempts state law, unless the agency meets the
consultation and funding requirements of section 6 of the Executive
Order. This proposed rule does not have federalism implications and
does not impose substantial direct compliance costs on state and local
governments or preempt state law within the meaning of the Executive
Order.
Statement of Availability of IRS Documents
 IRS Revenue Procedures, Revenue Rulings, and Notices cited in this
preamble are published in the Internal Revenue Bulletin (or Cumulative
Bulletin) and are available from the Superintendent of Documents, U.S.
Government Publishing Office, Washington, DC 20402, or by visiting the
IRS website at http://www.irs.gov.
Comments and Requests for a Public Hearing
 Before these proposed regulations are adopted as final regulations,
consideration will be given to any electronic and written comments that
are submitted timely to the IRS as prescribed in this preamble under
the ADDRESSES heading. The Treasury Department and the IRS request
comments on all aspects of the proposed rules. All comments will be
available at http://www.regulations.gov or upon request. A public
hearing will be scheduled if requested in writing by any person that
timely submits written comments. If a public hearing is scheduled,
notice of the date, time, and place for the public hearing will be
published in the Federal Register.
Drafting Information
 The principal author of these proposed regulations is Mikhail
Zhidkov, Office of the Associate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment Taxes). Other personnel from the
Treasury Department and the IRS participated in their development.
List of Subjects in 26 CFR Part 31
 Employment taxes, Fishing vessels, Gambling, Income taxes,
Penalties, Pensions, Railroad retirement, Reporting and recordkeeping
requirements, Social security, Unemployment compensation.
Proposed Amendments to the Regulations
 Accordingly, 26 CFR part 31 is proposed to be amended as follows:
PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
0
Paragraph 1. The authority citation for part 31 is amended by adding an
entry for Sec. 31.3402 in numerical order to read as follows:
 Authority: 26 U.S.C. 7805 * * *
* * * * *
 Section 31.3402 also issued under 26 U.S.C. 3402(i) and (m)
* * * * *
Sec. 31.3401(e)-1 [Removed]
0
Par. 2. Section 31.3401(e)-1 is removed.
0
Par. 3. Section 31.3402(a)-1 is amended by adding paragraphs (g) and
(h) to read as follows:
Sec. 31.3402(a)-1 Requirement of withholding.
* * * * *
 (g) Definitions and Interchangeable Terms.--For purposes of Chapter
24 and this Subpart E of Part 31 of the Employment Tax Regulations:
 (1) References to ``withholding exemption certificate'' include
``withholding allowance certificate'' unless otherwise stated in
Subpart E of Part 31 of the Employment Tax Regulations.
 (2) [Reserved]
 (h) Applicability date.--The provisions of paragraph (g) of this
section apply on and after [DATE OF PUBLICATION OF FINAL REGULATIONS IN
THE FEDERAL REGISTER]. Under section 7805(b)(7) a taxpayer may choose
to apply paragraph (g) of this section on and after January 1, 2020.
0
Par. 4. Section 31.3402(b)-1 is revised to read as follows:
Sec. 31.3402(b)-1 Percentage method of withholding.
 (a) Percentage method of withholding. The amount of tax to be
deducted and withheld from an employee's wages under the percentage
method of withholding is determined based on the entry for the
employee's anticipated filing status or marital status and other
entries on the employee's withholding allowance certificate using the
applicable percentage method tables and computational procedures set
forth in the applicable forms, instructions, publications, and other
guidance prescribed by the Commissioner issued with respect to the
period in which wages are paid.
 (b) Applicability date. The provisions of this section apply on and
after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL
REGISTER]. For rules that apply before [DATE OF PUBLICATION OF FINAL
REGULATIONS IN THE FEDERAL REGISTER], see 26 CFR part 31, revised as of
March 14, 2019. Under section 7805(b)(7) a taxpayer may choose to apply
this section on and after January 1, 2020.
0
Par. 5. Section 31.3402(c)-1 is amended by:
0
1. Revising paragraph (a)(1).
0
2. Redesignating paragraph (a)(2) as paragraph (a)(3).
0
3. Adding a new paragraph (a)(2).
0
4. Revising paragraph (b).
0
5. In paragraph (c)(1), revising the first sentence
0
6. Adding paragraph (f).
 The revisions and additions read as follows:
Sec. 31.3402(c)-1 Wage bracket withholding.
 (a) * * *
 (1) The employer may elect to use the wage bracket method provided
in section 3402(c) instead of the percentage method with respect to any
employee. The tax computed under the wage bracket method shall be in
lieu of the tax required to be deducted and withheld under section
3402(a).
 (2) The amount of tax to be deducted and withheld from an
employee's wages under the wage bracket method of withholding is
determined based on the entry for the employee's anticipated filing
status or marital status and other entries on the employee's
withholding allowance certificate using the applicable wage bracket
method tables and computational procedures set forth in the applicable
forms, instructions, publications, and other guidance prescribed by the
Commissioner issued with respect to the period in which wages are paid.
* * * * *
 (b) Established payroll periods, other than daily or miscellaneous,
covered by wage bracket withholding tables. The wage bracket
withholding tables applicable to the employee's filing status set forth
in forms, instructions, publications, and other guidance prescribed by
the Commissioner for established periods other than daily or
miscellaneous should be used in determining the tax to be deducted and
withheld for any such period without reference to the time the employee
is actually engaged in the performance of services during such payroll
period.
 (c) * * *
 (1) * * * The tables applicable to a daily or miscellaneous payroll
period show the tentative amount of tax to be deducted and withheld
from an
[[Page 8363]]
employee's wages for the employee's filing status for one day.* * *
* * * * *
 (f) Applicability date. The provisions of this section apply on and
after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL
REGISTER]. For rules that apply before [DATE OF PUBLICATION OF FINAL
REGULATIONS IN THE FEDERAL REGISTER], see 26 CFR part 31, revised as of
March 14, 2019. Under section 7805(b)(7) a taxpayer may choose to apply
this section on and after January 1, 2020.
0
Par. 6. Section 31.3402(f)(1)-1 is revised to read as follows:
Sec. 31.3402(f)(1)-1 Withholding allowance.
 (a) In general. (1) Except as otherwise provided in section
3402(f)(6) (see Sec. 31.3402(f)(6)-1), an employee receiving wages
will, on any day, be entitled to a withholding allowance as provided in
section 3402(f)(1) and paragraph (b) of this section. In order to
receive the benefit of the withholding allowance, the employee must
furnish to the employer a valid withholding allowance certificate in
effect for the calendar year as provided in section 3402(f)(2) and
Sec. 31.3402(f)(2)-1.
 (2) The employer is not required to ascertain whether the
withholding allowance claimed is greater than the withholding allowance
to which the employee is entitled. For rules relating to invalid
withholding allowance certificates, see Sec. 31.3402(f)(2)-1(f)(3),
for rules relating to required submission of copies of certain
withholding allowance certificates to the Internal Revenue Service, see
Sec. 31.3402(f)(2)-1(g)(1), and for rules relating to the notice of
the maximum withholding allowance permitted, see Sec. 31.3402(f)(2)-
1(g)(2).
 (b) Withholding allowance defined. (1) Generally, the withholding
allowance to which an employee is entitled is determined under the
computational procedures prescribed by the Commissioner in forms,
instructions, publications, and other guidance for the calendar year
for which the withholding allowance certificate is in effect.
 (2) The withholding allowance is determined based on the
following--
 (i) Whether the employee is an individual for whom a deduction is
allowable with respect to another taxpayer under section 151;
 (ii) If the employee is married, whether the employee's spouse is
an individual for whom a deduction is allowable with respect to another
taxpayer under section 151 but only if such spouse does not have in
effect a withholding allowance certificate claiming such deduction;
 (iii) If the employee is married, whether the employee's spouse is
entitled to additional deductions, credits, or other items the employee
elects to take into account under Sec. 31.3402(m)-1 or would be so
entitled if the employee's spouse were an employee receiving wages, but
only if such spouse does not have in effect a withholding allowance
certificate claiming such allowance;
 (iv) Any credit under section 24(a) that the employee reasonably
expects to be able to claim on the employee's income tax return for the
calendar year for which the withholding allowance certificate is in
effect, except that the employee may not take into account any credit
under section 24(a) if this credit is claimed on another valid
withholding allowance certificate in effect with respect to another
employer of the employee or the employee's spouse. In addition, an
employee whose employer must withhold for that employee pursuant to a
notice under Sec. 31.3402(f)(2)-1(g)(2) must offset any tax benefit
resulting from a credit under section 24(a) with any anticipated income
tax attributable to items other than wages includible in the employee's
gross income in the manner prescribed by the Commissioner;
 (v) Any additional deductions, credits, or other items the employee
elects to take into account under Sec. 31.3402(m)-1 for the calendar
year for which the withholding allowance certificate is in effect;
 (vi) The basic standard deduction (as defined in section 63(c)(2))
relating to the filing status the employee reasonably expects to claim
on the employee's income tax return for the calendar year for which the
withholding allowance certificate is in effect; and
 (vii) Any adjustment resulting from multiple withholding allowance
certificates the employee, the employee's spouse, or both have or
reasonably expect to have in effect with respect to one or more
employers, determined based on the instructions to the withholding
allowance certificate and other guidance for the calendar year for
which the withholding allowance certificate is in effect.
 (c) Applicability date. The provisions of this section apply on and
after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL
REGISTER]. For rules that apply before [DATE OF PUBLICATION OF FINAL
REGULATIONS IN THE FEDERAL REGISTER], see 26 CFR part 31, revised as of
March 14, 2019. Under section 7805(b)(7) a taxpayer may choose to apply
this section on and after January 1, 2020.
0
Par. 7. Section 31.3402(f)(2)-1 is revised to read as follows:
Sec. 31.3402(f)(2)-1 Furnishing of withholding allowance certificates
 (a) On commencement of employment. (1) On or before the date on
which an individual commences employment with an employer, the
individual must furnish the employer with a signed withholding
allowance certificate (see Sec. 31.3402(f)(5)-1) relating to the
filing status the employee reasonably expects to claim under Sec.
31.3402(l)-1(b) for the calendar year for which the withholding
allowance certificate is in effect and the withholding allowance under
Sec. 31.3402(f)(1)-1(b) that the employee claims.
 (2) In no event may the withholding allowance exceed the
withholding allowance that the employee is entitled to as determined
based on the employee's reasonable expectations and the instructions
set forth in forms, instructions, publications, and other guidance
prescribed by the Commissioner.
 (3) The employee may claim exemption from withholding if the
certifications described in section 3402(n) and Sec. 31.3402(n)-
1(a)(1) and (2) are true with respect to the employee.
 (4) If an employee has no valid withholding allowance certificate
in effect with the employer at the time of the payment of the wages,
and fails to furnish a valid withholding allowance certificate to the
employer, the employee will be treated as single but having the
withholding allowance provided in forms, instructions, publications,
and other guidance prescribed by the Commissioner.
 (b) Change of status that affects calendar year--(1) General rule.
If, on any day during the calendar year, the employee experiences a
change of status that reduces the employee's withholding allowances, or
withholding allowance in the manner described in paragraph (b)(2) of
this section, the employee must, within 10 days after the change
occurs, furnish the employer with a new withholding allowance
certificate claiming the withholding allowance to which the employee is
entitled under Sec. 31.3402(f)(1)-1(b), unless paragraph (b)(3) of
this section applies to the employee.
 (2) Changes of status. A change of status occurs if any of the
following changes occur on any day during the calendar year:
[[Page 8364]]
 (i) The employee's filing status changes in the manner described in
Sec. 31.3402(l)-1(c).
 (ii) The employee no longer has only one withholding allowance
certificate in effect for the employee, the employee's spouse, or both,
and the employee or the employee's spouse selects higher withholding
rate tables on the additional withholding allowance certificate, but
higher withholding rate tables are not selected on any previously
furnished withholding allowance certificate.
 (iii) The employee has multiple withholding allowance certificates
in effect on which higher withholding rate tables are not selected, and
the employee or the employee's spouse reasonably expects an increase in
regular wages for the calendar year (as defined in Sec. 31.3402(g)-
1(a)(1)(ii)) in excess of $10,000.
 (iv) The employee has included on a valid withholding allowance
certificate the child tax credit allowed under section 24(a) but
reasonably expects the number of individuals who satisfy the definition
of ``qualifying child'' as defined in section 24(c) who will be
reported on the employee's income tax return for the year for which tax
is being withheld to be less than the number taken into account in
completing the withholding allowance certificate.
 (v) The employee has included on a valid withholding allowance
certificate a tax credit allowed under section 24(a) or other tax
credits allowed under Sec. 31.3402(m)-1 but reasonably expects the
employee's tax credits that will be reported on the employee's income
tax return for the year for which tax is being withheld to decrease by
more than $500 from the amount taken into account in completing the
withholding allowance certificate.
 (vi) The employee has included on a valid withholding allowance
certificate deductions allowed under Sec. 31.3402(m)-1 but reasonably
expects the employee's included income tax deductions that will be
reported on the employee's income tax return for the year for which tax
is being withheld to decrease by more than $2,300 from the amount taken
into account in completing the withholding allowance certificate.
 (vii) It is no longer reasonable for an employee who has furnished
the employer with a withholding allowance certificate which relies upon
the certifications described in Sec. 31.3402(n)-1(a) to anticipate
that the employee will incur no liability for income tax imposed under
subtitle A of the Code for the current or previous taxable year.
 (3) Exception. If one or more of the changes described in paragraph
(b)(2) of this section occurs, but the total effect of the changes
together with any other changes affecting the employee's anticipated
tax liability under Subtitle A is not anticipated to result in an
amount of tax to be deducted and withheld from the employee's wages
under section 3402 for the year that is less than the employee's
anticipated tax liability under Subtitle A, the employee is not
required to furnish a new withholding allowance certificate.
 (c) Increase in withholding allowance. If, on any day during the
calendar year, the employee experiences a change of status that
increases the employee's withholding allowance, the employee may
furnish the employer with a new withholding allowance certificate
claiming the withholding allowance the employee is entitled to under
Sec. 31.3402(f)(1)-1(b).
 (d) Exemption from withholding. If, on any day during the calendar
year, the certifications described in section 3402(n) and Sec.
31.3402(n)-1(a)(1) and (2) are true with respect to an employee, the
employee may furnish his employer with a withholding allowance
certificate claiming exemption from withholding in the manner described
in forms, instructions, publications, and other guidance prescribed by
the Commissioner.
 (e) Change of status which affects next calendar year--(1) General
rule. If, on any day during the calendar year, the withholding
allowance to which the employee will be, or may reasonably be expected
to be, entitled under Sec. 31.3402(f)(1)-1(b) for the next calendar
year, but not for the current calendar year, decreases in the manner
prescribed in paragraph (b)(2) of this section, the employee must
furnish a new withholding allowance certificate claiming the
withholding allowance the employee is entitled to under Sec.
31.3402(f)(1)-1(b) to take effect in the next calendar year by the
later of December 1 of the calendar year of the year in which the
change occurs or within 10 days after the change occurs, unless
paragraph (e)(2) of this section applies to the employee.
 (2) Exception. If one or more of the changes in paragraph (b)(2) of
this section occurs, but the total effect of the changes together with
any other changes affecting the employee's anticipated tax liability
under subtitle A is not anticipated to result in an amount of tax to be
deducted and withheld from the employee's wages under section 3402 for
the employee's next year that is less than the employee's anticipated
tax liability under Subtitle A, the employee is not required to furnish
a new withholding allowance certificate.
 (f) Special rules--(1) Employer requests. Before December 1 of each
year, every employer should request each employee to furnish a new
withholding allowance certificate for the next calendar year, in the
event of a change to the employee's withholding allowance.
 (2) Social security account numbers. Every individual to whom a
social security number has been assigned must include such number on
any withholding allowance certificate furnished to an employer. An
employee may not use a truncated social security number (see Sec.
301.6109-4) in completing the withholding allowance certificate. For
provisions relating to the obtaining of an account number from the
Social Security Administration, see Sec. 31.6011(b)-2.
 (3) Invalid withholding allowance certificates--(i) General rule.
Any alteration of or unauthorized addition to a withholding allowance
certificate causes such certificate to be invalid; see Sec.
31.3402(f)(5)-1(b) for the definitions of alteration and unauthorized
addition. Any withholding allowance certificate which the employee
clearly indicates to be false by an oral statement or by a written
statement (other than one made on the withholding allowance certificate
itself) made by the employee to the employer on or before the date on
which the employee furnishes such certificate is also invalid. For
purposes of the preceding sentence, the term ``employer'' includes any
individual authorized by the employer either to receive withholding
allowance certificates, to make withholding computations, or to make
payroll distributions.
 (ii) Employer disregard of invalid withholding allowance
certificate. If an employer receives an invalid withholding allowance
certificate, the employer must disregard it for purposes of computing
withholding. The employer must inform the employee who furnished the
certificate that it is invalid, and must request another withholding
allowance certificate from the employee. If the employee who furnished
the invalid certificate fails to comply with the employer's request,
the employer must treat the employee as single but having the
withholding allowance provided by the forms, instructions,
publications, and other guidance prescribed by the Commissioner. If,
however, a prior certificate is in effect with respect to the employee,
the employer must continue to withhold in accordance with the prior
certificate.
[[Page 8365]]
 (g) Submission of certain withholding allowance certificates and
notice of maximum withholding allowance permitted--(1) Submission of
certain withholding allowance certificates--(i) In general. An employer
must submit to the Internal Revenue Service (IRS) a copy of any
currently effective withholding allowance certificate as directed in a
written notice to the employer from the IRS or as directed in published
guidance.
 (A) Notice to submit withholding allowance certificates. A notice
to the employer to submit withholding allowance certificates may relate
either to one or more named employees, to one or more reasonably
segregable units of the employer, or to withholding allowance
certificates under certain specified criteria. The notice will
designate the IRS office to which the copies of the withholding
allowance certificates must be submitted. Alternatively, upon notice
from the IRS, the employer must make available for inspection by an IRS
employee withholding allowance certificates received from one or more
named employees, from one or more reasonably segregable units of the
employer, or from employees who have furnished withholding allowance
certificates under certain specified criteria.
 (B) Published guidance. Employers may also be required to submit
copies of withholding allowance certificates under certain specified
criteria when directed to do so by the IRS in published guidance in the
Internal Revenue Bulletin (see Sec. 601.601(d)(2) of this chapter).
 (ii) Withholding after submission of withholding allowance
certificate. After a copy of a withholding allowance certificate has
been submitted to the IRS under this paragraph (g)(1), the employer
must withhold tax on the basis of the withholding allowance
certificate, if the withholding allowance certificate meets the
requirements of Sec. 31.3402(f)(5)-1. However, the employer may not
withhold on the basis of the withholding allowance certificate if the
certificate must be disregarded based on a notice of the maximum
withholding allowance permitted under the provisions of paragraph
(g)(2) of this section.
 (2) Notice of the maximum withholding allowance permitted--(i)
Notice to employer. The IRS may notify the employer in writing that the
employee is not entitled to claim a complete exemption from withholding
or more than the maximum withholding allowance specified by the IRS in
the written notice. The notice will also specify the applicable filing
status for purposes of calculating the required amount of withholding.
The notice will specify the IRS office to be contacted for further
information. The notice of maximum withholding allowance permitted may
be issued if--
 (A) The IRS determines that a copy of a withholding allowance
certificate submitted under paragraph (g)(1) of this section or
otherwise provided to the IRS includes a materially incorrect statement
or determines, after a request to the employee for verification of the
statements on the certificate, that the IRS lacks sufficient
information to determine if the certificate is correct; or
 (B) The IRS otherwise determines that the employee is not entitled
to claim a complete exemption from withholding and is not entitled to
claim more than a specified number of withholding exemptions,
withholding allowances, or a specified withholding allowance.
 (ii) Notice to employee. If the IRS provides a notice to the
employer under this paragraph (g)(2), the IRS will also provide the
employer with a similar notice for the employee (employee notice) that
identifies the maximum withholding allowance permitted and specifies
the filing status to be used for calculating the required amount of
withholding for the employee. The employee notice will also indicate
the process by which the employee can provide additional information to
the IRS for purposes of determining the appropriate withholding
allowance and/or modifying the specified filing status. The IRS will
also mail a similar notice to the employee's last known address. For
further guidance regarding the definition of last known address, see
Sec. 301.6212-2 of this chapter. If the IRS is unable to determine a
last known address for the employee, the IRS will use other available
information as appropriate to mail the notice to the employee.
 (iii) Requirement to furnish. If the employee is employed by the
employer as of the date of the notice, the employer must furnish the
employee notice to the employee within 10 business days of receipt. The
employer may follow any reasonable business practice to furnish the
copy of the notice to the employee. For purposes of this paragraph
(g)(2)(iii), the determination of whether an employee is employed as of
the date of the notice is based on all the facts and circumstances,
including whether the employer has treated the employment relationship
as terminated for other purposes. An employee who is not performing
services for the employer as of the date of the notice is employed by
the employer as of the date of the notice for purposes of this
paragraph (g)(2)(iii) if--
 (A) The employer pays wages with respect to prior employment to the
employee subject to income tax withholding on or after the date
specified in the notice;
 (B) The employer reasonably expects the employee to resume the
performance of services for the employer within twelve months of the
date of the notice; or
 (C) The employee is on a bona fide leave of absence and either the
period of such leave does not exceed twelve months or the employee
retains a right to reemployment with the employer under an applicable
statute or by contract.
 (iv) Requirement to withhold based on the notice. If the employer
is required to furnish the employee notice to the employee under
paragraph (g)(2)(iii) of this section, then the employer must withhold
tax on the basis of the maximum withholding allowance and the filing
status specified in the notice for any wages paid after the date
specified in the notice, except as provided in paragraphs (g)(2)(v)
through (ix) of this section. The employer must withhold tax in
accordance with the notice as of the date specified in the notice,
which shall be no earlier than 45 calendar days after the date of the
notice.
 (v) Employment resumes after twelve months. If the employer is
required to furnish the employee notice to the employee only pursuant
to paragraph (g)(2)(iii)(B) of this section and the employee resumes
the performance of services for the employer more than 12 months after
the date of the notice, then the employer is not required to withhold
based on the notice.
 (vi) Requirement to withhold based on an existing Form W-4. If a
withholding allowance certificate is in effect with respect to the
employee before the employer receives a notice of the maximum
withholding allowance permitted under this paragraph (g)(2), the
employer must continue to withhold tax in accordance with the existing
withholding allowance certificate, rather than on the basis of the
notice, if the existing withholding allowance certificate does not
claim complete exemption from withholding and claims a filing status, a
withholding allowance, and any additional amount under Sec.
31.3402(i)-1(a)(1) and (2) that results in more withholding than would
result from applying the filing status and withholding allowance
specified in the notice.
 (vii) Modification notice. After issuing the notice specifying the
maximum
[[Page 8366]]
withholding allowance permitted and the filing status, the IRS may
issue a subsequent notice to the employer and the employee that
modifies the original notice (modification notice). The modification
notice may change the filing status and/or the withholding allowance
permitted. The employer must withhold based on the modification notice
as of the date specified in the modification notice.
 (viii) Requirement to withhold after termination of employment. If
the employee is employed as of the date of the notice under paragraph
(g)(2)(iii) of this section but the employer or employee terminates the
employment relationship after the date of the notice, the employer must
continue to withhold based on the maximum withholding allowance and the
filing status specified in the notice or a modification notice if any
wages subject to income tax withholding are paid with respect to the
prior employment after such date. Furthermore, the employer must
withhold based on the notice or modification notice if the employee
resumes an employment relationship with the employer within 12 months
after the termination of the employment relationship. Whether the
employment relationship is terminated is based on all the facts and
circumstances.
 (ix) Requirement to withhold based on new Form W-4. The employee
may furnish a new withholding allowance certificate after the employer
receives a notice or modification notice from the IRS of the maximum
withholding allowance permitted under this paragraph (g)(2).
 (A) Employee requests more withholding. If the employee furnishes a
new withholding allowance certificate after the employer receives the
notice or modification notice, the employer must withhold tax on the
basis of that new certificate only if the new certificate does not
claim complete exemption from withholding and claims a filing status, a
withholding allowance, and any additional amount under Sec.
31.3402(i)-1(a)(1) and (2) that results in more withholding than would
result under the notice or modification notice.
 (B) Employee requests less withholding. If the employee furnishes a
new withholding allowance certificate after the employer receives the
notice or modification notice, the employer must disregard the new
certificate and withhold on the basis of the notice or modification
notice if the employee claims complete exemption from withholding or
claims a filing status, a withholding allowance, and any additional
amount under Sec. 31.3402(i)-1(a)(1) and (2) that results in less
withholding than would result under the notice or modification notice.
If the employee wants to put a new certificate into effect that results
in less withholding than that required under the notice or modification
notice, the employee must contact the IRS. The employer must withhold
on the basis of the notice or modification notice unless the IRS
subsequently notifies the employer to withhold based on the new
certificate.
 (3) Definition of employer. For purposes of this paragraph (g), the
term employer includes any person authorized by the employer to receive
withholding allowance certificates, to make withholding computations,
or to make payroll distributions.
 (4) Examples. The following examples illustrate the rules of this
section.
 (i) Example 1. Employer U receives a notice from the IRS that
identifies the maximum withholding allowance permitted and specifies
the filing status for Employee A. Employee A is not currently
performing any services for Employer U. However, Employer U is
continuing to make certain wage payments to Employee A. Employer U
must furnish the employee notice to Employee A within 10 business
days of receipt and must withhold based on the notice on any wages
paid to Employee A on or after the date specified in the notice.
 (ii) Example 2. Employer V receives a notice in October of Year
1 from the IRS that identifies the maximum withholding allowance
permitted and specifies the filing status for Employee B. Employee B
has not performed services for Employer V since August of Year 1.
However, since Employee B has performed services for Employer V for
several years on a seasonal basis, Employer V reasonably expects
Employee B to resume the performance of services for Employer V in
June of Year 2, a date that is within 12 months of the date of the
notice. Employer V is required to furnish the notice to Employee B
within 10 business days of receipt. Employee B does not resume the
performance of services with Employer V until June of Year 3.
Employer V is not required to withhold based on the notice.
 (iii) Example 3. Employer W receives a notice from the IRS that
identifies the maximum withholding allowance permitted and specifies
the filing status for Employee C. Employee C began a 4-month unpaid
maternity leave of absence three weeks before Employer W received
the notice. Employer W must furnish the employee notice to Employee
C within 10 business days of receipt. When her maternity leave ends
and Employee C resumes performing services for Employer W, Employer
W must withhold based on the notice.
 (iv) Example 4. Employer X receives a notice from the IRS in
Year 1 that identifies the maximum withholding allowance permitted
and specifies the filing status for Employee D. Employer X must
furnish the employee notice to Employee D within 10 business days of
receipt and withhold based on the notice. In Year 2, Employee D
terminates the employment relationship. Employee D applies for a
different position with Employer X and resumes employment 10 months
after having left her previous position with Employer X. Since
Employer X rehired Employee D within 12 months after the termination
of employment, Employer X must withhold based on the notice.
 (v) Example 5. Employer Y receives a notice from the IRS that
identifies the maximum withholding allowance permitted and specifies
the filing status for Employee E. Employer Y must furnish the
employee notice to Employee E within 10 business days of receipt.
After receipt of this notice, Employee E contacts the IRS and
establishes that the employee is entitled to claim a modified filing
status and withholding allowance. Employer Y receives a modification
notice from the IRS that changes the maximum withholding allowance
permitted for Employee E. Employer Y must withhold tax based on the
modification notice as of the date specified in such notice.
 (vi) Example 6. Employer Z pays remuneration to Employee F, a
United States citizen, for services performed in Country M. Employer
Z receives a notice from the IRS in Year 1 that identifies the
maximum withholding allowance permitted and specifies the filing
status for Employee F. Employer Z must furnish the employee notice
to Employee F within 10 business days of receipt. Employer Z
reasonably believes all the remuneration paid to Employee F in Year
1 is excluded from Employee F's gross income under section 911.
Since section 3401(a)(8)(B) excludes such remuneration from wages
for income tax withholding purposes, Employer X does not have to
withhold on such remuneration, notwithstanding the maximum
withholding allowance permitted and filing status specified in the
notice. In Year 2, Employee F returns to the United States to
perform services. Employer Z does not reasonably believe any part of
Employee F's remuneration paid in Year 2 is excluded from Employee
F's gross income under section 911. Rather, Employer Z reasonably
believes that remuneration paid to Employee F in Year 2 is subject
to income tax withholding. Employer Z must withhold on the
remuneration paid to Employee F in Year 2 based on the notice.
 (h) Applicability date. The provisions of paragraph (g) of this
section apply on February 13, 2020. For rules that apply under
paragraph (g) before February 13, 2020, see 26 CFR part 31, revised as
of March 14, 2019. The provisions of paragraphs (a) through (f) of this
section apply on and after [DATE OF PUBLICATION OF FINAL REGULATIONS IN
THE FEDERAL REGISTER]. For rules that apply before [DATE OF PUBLICATION
OF FINAL REGULATIONS IN THE FEDERAL REGISTER], see 26 CFR part 31,
revised as of March 14, 2019. Under section 7805(b)(7) a taxpayer may
choose to
[[Page 8367]]
apply paragraphs (a) through (g) of this section on and after January
1, 2020.
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Par. 8. Section 31.3402(f)(3)-1 is revised to read as follows:
Sec. 31.3402(f)(3)-1 When withholding allowance certificate takes
effect.
 (a) No withholding allowance certificate on file. A withholding
allowance certificate furnished to the employer in any case in which no
previous withholding allowance certificate is in effect with such
employer, takes effect as of the beginning of the first payroll period
ending, or the first payment of wages made without regard to a payroll
period, on or after the date on which such certificate is so furnished.
 (b) Withholding allowance certificate on file. Except as provided
in paragraph (c) of this section, a withholding allowance certificate
furnished to the employer in any case in which a previous withholding
allowance certificate is in effect with such employer takes effect as
of the beginning of the 1st payroll period ending (or the 1st payment
of wages made without regard to a payroll period) on or after the 30th
day after the day on which such certificate is so furnished. However,
the employer may elect to put a withholding allowance certificate into
effect earlier, beginning with any payment of wages on or after the day
on which the certificate is so furnished.
 (c) Withholding allowance certificate furnished to take effect in
next calendar year. A withholding allowance certificate furnished to
the employer pursuant to section 3402(f)(2)(C) (see Sec.
31.3402(f)(2)-1(e) or Sec. 31.3402(l)-1(c)) which effects a change for
the next calendar year, does not take effect, and may not be made
effective, with respect to the calendar year in which the certificate
is furnished.
 (d) Applicability date. The provisions of this section apply on
[DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL REGISTER]. For
rules that apply before [DATE OF PUBLICATION OF FINAL REGULATIONS IN
THE FEDERAL REGISTER], see 26 CFR part 31, revised as of March 14,
2019. Under section 7805(b)(7) a taxpayer may choose to apply this
section on and after January 1, 2020.
Sec. 31.3402(f)(4)-1 [Removed]
0
Par. 9. Section 31.3402(f)(4)-1 is removed.
Sec. 31.3402(f)(4)-2 [Redesignated as Sec. 31.3402(f)(4)-1]
0
Par. 10. Section 31.3402(f)(4)-2 is redesignated as Sec.
31.3402(f)(4)-1.
0
Par. 11. Newly redesignated Sec. 31.3402(f)(4)-1 is revised to read as
follows:
Sec. 31.3402(f)(4)-1 Effective period of a withholding allowance
certificate.
 (a) In general. Except as provided in paragraph (b) of this section
and Sec. 31.3402(f)(2)-1(g)(2), a withholding allowance certificate
that takes effect under section 3402(f) of the Internal Revenue Code of
1986 continues in effect with respect to the employee until another
withholding allowance certificate takes effect under section 3402(f).
 (b) Certifications under section 3402(n) eliminating requirement of
withholding. The certifications described in Sec. 31.3402(n)-1(a) made
by an employee with respect to the employee's preceding taxable year
and current taxable year are effective until either a new withholding
allowance certificate furnished by the employee takes effect or the
existing certificate that relies upon such certifications expires. If
an employee's certificate expires and the employee fails to furnish a
valid withholding allowance certificate, the employee will be treated
as single but having the withholding allowance provided in forms,
instructions, publications, and other guidance prescribed by the IRS.
In no case shall a withholding allowance certificate that relies upon
such certifications be effective with respect to any payment of wages
made to an employee:
 (1) In the case of an employee whose liability for tax under
subtitle A is determined on a calendar year basis, after February 15 of
the calendar year following the estimation year, or
 (2) In the case of an employee to whom paragraph (b)(1) of this
section does not apply, after the 15th day of the 2nd calendar month
following the last day of the estimation year.
 (c) Estimation year. The estimation year is the taxable year
including the day on which the employee furnishes the withholding
allowance certificate to the employer, except that if the employee
furnishes the withholding allowance certificate to the employer and
specifies on the certificate that the certificate is not to take effect
until a specified future date, the estimation year will be the taxable
year including that specified future date.
 (d) Applicability to notice of maximum withholding allowance. If a
withholding allowance certificate is no longer in effect because of the
application of Sec. 31.3402(f)(2)-1(g)(2), the employer is no longer
required to withhold pursuant to any notice under Sec. 31.3402(f)(2)-
1(g)(2), and the employee fails to furnish the employer a valid
withholding allowance certificate, then the employee will be treated as
single but having the withholding allowance provided in forms,
instructions, publications, and other guidance prescribed by the
Commissioner, in accordance with Sec. 31.3402(f)(2)-1(a)(4).
 (e) Applicability date. The provisions of this section apply on and
after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE Federal
Register]. For rules that apply before [DATE OF PUBLICATION OF FINAL
REGULATIONS IN THE Federal Register], see 26 CFR part 31, revised as of
March 14, 2019. Under section 7805(b)(7) a taxpayer may choose to apply
this section on and after January 1, 2020.
0
Par. 12. Section 31.3402(f)(5)-1 is revised to read as follows:
Sec. 31.3402(f)(5)-1 Form and contents of withholding allowance
certificates
 (a) In general--(1) Form W-4. Form W-4, ``Employee's Withholding
Certificate,'' previously called ``Employee's Withholding Allowance
Certificate,'' is the form prescribed for the withholding allowance
certificate required to be furnished under section 3402(f)(2). A
withholding allowance certificate must be prepared in accordance with
the instructions applicable thereto, and must set forth fully and
clearly the information that is called for therein. In lieu of the
prescribed form, an employer may prepare and provide to employees a
form the provisions of which are identical to those of the prescribed
form, but only if the employer also provides employees with all the
tables, instructions, and worksheets set forth in the Form W-4 in
effect at that time, and only if the employer complies with all revenue
procedures relating to substitute forms in effect at that time.
 (2) Employee substitute forms. Employers are prohibited from
accepting a substitute form developed by an employee, and an employee
furnishing such form will be treated as failing to furnish a
withholding allowance certificate. For further guidance regarding the
employer's obligations when an employee is treated as failing to
furnish a withholding allowance certificate, see Sec. 31.3402(f)(2)-1.
 (3) Current year revision. Only the Form W-4 revision in effect for
a calendar year may be furnished by an employee in that calendar year
and given legal effect by the employer, unless provided otherwise in
forms,
[[Page 8368]]
instructions, publications, or other guidance, except that an employee
may furnish the Form W-4 revision for the following calendar year in
the current calendar year to take effect for the following calendar
year.
 (4) Examples. The following examples illustrate the rule in
paragraph (a)(3) of this section.
 (i) Example 1. Employee A furnishes a 2019 Form W-4 to Employer
X in calendar year 2020. The 2019 Form W-4 furnished by Employee A
in 2020 has no legal effect. Employer X must disregard this 2019
Form W-4 furnished in 2020 and continue to withhold based on a
previously furnished Form W-4 that has been in effect for Employee
A, if any. If Employee A has no Form W-4 in effect, she is treated
as having no valid withholding allowance certificate in effect.
 (ii) Example 2. Employee A furnishes a 2021 Form W-4 to Employer
X in calendar year 2020 to take effect in calendar year 2021. The
2021 Form W-4 is valid, and the employer must put this form in
effect in 2021 in accordance with the timing rules in Sec.
31.3402(f)(3)-1.
 (b) Invalid Form W-4. A Form W-4 does not meet the requirements of
section 3402(f)(5) or this section and is invalid if it includes an
alteration or unauthorized addition. For purposes of Sec.
31.3402(f)(2)-1(f)(3) and this paragraph (b)--
 (1) An alteration of a withholding allowance certificate is any
deletion of the language of the jurat or other similar provision of
such certificate by which the employee certifies or affirms the
correctness of the completed certificate, or any material defacing of
such certificate;
 (2) An unauthorized addition to a withholding allowance certificate
is any writing on such certificate other than the entries requested on
the Form W-4 (e.g., name, address, and filing status) or permitted by
instructions or other guidance. For purposes of this rule, an entry
claiming exemption from withholding that is accompanied by other
entries on the Form W-4 (other than the employee's filing status) that
could potentially affect the amount of income tax deducted and withheld
from the employee's pay is an unauthorized addition; consequently, the
employer must treat the Form W-4 as an invalid Form W-4.
 (c) Electronic Form W-4--(1) In general. An employer may establish
a system for its employees to furnish withholding allowance
certificates electronically.
 (2) Requirements--(i) In general. The electronic system must ensure
that the information received is the information sent, and must
document all occasions of employee access that result in the furnishing
of a Form W-4. In addition, the design and operation of the electronic
system, including access procedures, must make it reasonably certain
that the person accessing the system and furnishing the Form W-4 is the
employee identified in the form.
 (ii) Information to employer. The electronic furnishing must
provide the employer with exactly the same information as the current
version of the official Internal Revenue Service (IRS) Form W-4
available on irs.gov.
 (iii) Information to employee. The electronic Form W-4 system must
provide the employee with the same information as the current version
of the official IRS Form W-4 available on irs.gov and must satisfy any
requirements specified by the IRS in forms, publications, and other
guidance. The electronic Form W-4 system must provide employees the
ability to claim exemption from withholding under section 3402(n) and
must include the two certifications described in Sec. 31.3402(n)-1(a).
 (iv) Jurat and signature requirements. The electronic furnishing
must be signed by the employee under penalties of perjury.
 (A) Jurat. The jurat (perjury statement) must contain the language
that appears on the paper Form W-4. The electronic program must inform
the employee that he or she must make the declaration set forth in the
jurat and that the declaration is made by signing the Form W-4. The
instructions and the language of the jurat must immediately follow the
employee's income tax withholding selections and immediately precede
the employee's electronic signature.
 (B) Electronic signature. The electronic signature must identify
the employee furnishing the electronic Form W-4 and authenticate and
verify the furnishing. For this purpose, the terms ``authenticate'' and
``verify'' have the same meanings as they do when applied to a written
signature on a paper Form W-4. An electronic signature can be in any
form that satisfies the foregoing requirements. The electronic
signature must be the final entry in the employee's Form W-4
furnishing.
 (v) Copies of electronic Forms W-4. Upon request by the Internal
Revenue Service, the employer must supply a hard copy of the electronic
Form W-4 and a statement that, to the best of the employer's knowledge,
the electronic Form W-4 was furnished by the named employee. The
hardcopy of the electronic Form W-4 must provide exactly the same
information as, but need not be a facsimile of, the paper Form W-4.
 (d) Applicability date. The provisions of this section apply on and
after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE Federal
Register], except that paragraph (a)(3) of this section applies on and
March 16, 2020. For rules that apply before [DATE OF PUBLICATION OF
FINAL REGULATIONS IN THE Federal Register], see 26 CFR part 31, revised
as of March 14, 2019. Under section 7805(b)(7) a taxpayer may choose to
apply this section on and after January 1, 2020.
0
Par. 13. Section 31.3402(f)(6)-1 is revised to read as follows:
Sec. 31.3402(f)(6)-1 Withholding exemptions for nonresident alien
individuals.
 (a) In general. (1) A nonresident alien individual (other than a
nonresident alien individual treated as a resident under section
6013(g) or (h)) subject to withholding under section 3402 is on any one
day entitled to the number of withholding exemptions corresponding to
the number of personal exemptions to which the nonresident alien is
entitled on such day by reason of the application of section 873(b)(3)
or section 876, whichever applies. Thus, a nonresident alien individual
who is not a resident of Canada or Mexico and who is not a resident of
Puerto Rico during the entire taxable year, is allowed only one
withholding exemption.
 (2) The withholding exemption in paragraph (a) of this section and
section 3402(f)(6) is the deduction allowed to the nonresident alien
individual under section 151.
 (b) Additional guidance. A nonresident alien individual (other than
a nonresident alien individual treated as a resident under section
6013(g) or (h)) subject to withholding must follow administrative
guidance such as forms, instructions, publications, or other guidance
prescribed by the IRS to determine the nonresident alien's withholding
allowance.
 (c) Applicability date. The provisions of this section apply on and
after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL
REGISTER]. For rules that apply before [DATE OF PUBLICATION OF FINAL
REGULATIONS IN THE FEDERAL REGISTER], see 26 CFR part 31, revised as of
March 14, 2019. Under section 7805(b)(7) a taxpayer may choose to apply
this section on and after January 1, 2020.
0
Par. 14. Section 31.3402(g)-1 is amended by
0
1. In paragraph (a)(2), revising the second sentence.
0
2. In paragraph (a)(7)(ii), revising the first sentence.
[[Page 8369]]
0
3. Adding paragraph (d).
 The revisions and addition read as follows:
Sec. 31.3402(g)-1 Supplemental wage payments.
 (a) * * *
 (2) * * * This flat rate shall be applied without regard to whether
income tax has been withheld from the employee's regular wages, and
without regard to any entries on Form W-4, including whether the
employee has claimed exempt status on Form W-4 or whether the employee
has requested additional withholding on Form W-4, and without regard to
the withholding method used by the employer. * * *
* * * * *
 (7) * * *
 (ii) * * * The determination of the tax to be withheld under
paragraph (a)(7)(iii) of this section is made without reference to any
payment of regular wages and without regard to any entries on the Form
W-4 other than the entry claiming exempt status on Form W-4 (see Sec.
31.3402(n)-1(b)). * * *
* * * * *
 (d) Applicability date. The provisions of paragraph (a)(2) and
(a)(7)(ii) of this section apply on and after [DATE OF PUBLICATION OF
FINAL REGULATIONS IN THE FEDERAL REGISTER]. Under section 7805(b)(7) a
taxpayer may choose to apply paragraph (a)(2) and (a)(7)(ii) of this
section on and after January 1, 2020.
Sec. 31.3402(h)(4)-1 [Amended]
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Par. 15. Section 31.3402(h)(4)-1 is amended by removing paragraph (b)
and redesignating paragraph (c) as paragraph (b).
Sec. 31.3402(i)-1 [Removed]
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Par. 16. Section 31.3402(i)-1 is removed.
Sec. 31.3402 (i)-2 [Redesignated as Sec. 31.3402(i)-1]
0
Par. 17. Section 31.3402(i)-2 is redesignated as Sec. 31.3402(i)-1.
0
Par. 18. Newly redesignated Sec. 31.3402(i)-1 is amended by:
0
1. Revising the section heading.
0
2. Revising paragraph (a)(2).
0
3. Adding paragraph (a)(3).
0
4. Revising paragraph (b).
 The revisions and addition read as follows:
Sec. 31.3402 (i)-1 Increases in withholding.
 (a) * * *
 (2) Increases in withholding based on additional income. (i) The
employee may request that the employer add an additional amount to the
employee's wages and that the employer deduct and withhold an
additional amount of income tax resulting from this addition under the
computational procedures prescribed by the IRS in forms, instructions,
publications, and other guidance for the calendar year for which the
withholding allowance certificate claiming an additional amount to add
to the employee's wages is furnished;
 (ii) The employee may request that the employer deduct and withhold
additional amounts of income tax resulting from the employee selecting
higher withholding rate tables on the withholding allowance
certificate;
 (iii) The employer must comply with the employee's request under
paragraph (a)(1)(i) or (ii) of this section, except that the employer
shall comply with the employee's request only to the extent that the
amount that the employee requests to be deducted and withheld under
this section does not exceed the amount that remains after the employer
has deducted and withheld all amounts otherwise required to be deducted
and withheld by Federal law (other than by section 3402(i) and this
section), State law, and local law (other than by State or local law
that provides for voluntary withholding); and
 (iv) The employer must comply with the employee's request in
accordance with the time limitations in Sec. 31.3402(f)(3)-1. The
employee must make the request on Form W-4 as provided in Sec.
31.3402(f)(5)-1 (relating to form and contents of withholding allowance
certificates), and this Form W-4 shall take effect and remain effective
in accordance with section 3402(f) and Sec. 31.3402(f)(4)-1.
 (3) Amount deducted treated as tax. The amount deducted and
withheld pursuant to paragraphs (a)(1) and (2) of this section shall be
treated as tax required to be deducted and withheld under section 3402.
 (b) Applicability date. The provisions of paragraph (a)(2) and (3)
of this section apply on and after [DATE OF PUBLICATION OF FINAL
REGULATIONS IN THE FEDERAL REGISTER]. Under section 7805(b)(7) a
taxpayer may choose to apply paragraphs (a)(2) and (3) of this section
on and after January 1, 2020.
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Par. 19. Section 31.3402(l)-1 is revised to read as follows:
Sec. 31.3402 (l)-1 Determination and disclosure of marital or filing
status.
 (a) In general. An employer shall apply the applicable percentage
method or wage bracket method withholding tables corresponding to the
marital status or filing status that the employee selects on a valid
withholding allowance certificate as set forth in forms, instructions,
publications, and other guidance prescribed by the Commissioner.
 (b) Employee's filing status. An employee will be treated as single
unless the employee selects head of household or married filing jointly
filing status on a valid withholding allowance certificate. Employees
may select a filing status other than single, subject to the following
conditions:
 (1) The employee may select head of household filing status on the
employee's withholding allowance certificate only if the employee
reasonably expects to be eligible to claim head of household filing
status under section 2(b) and Sec. 1.2-2(b) of this chapter on the
employee's income tax return.
 (2) The employee may select married filing jointly filing status on
the employee's withholding allowance certificate only if paragraph (d)
of this section applies to the employee and the employee reasonably
expects to file jointly a single return of income under Subtitle A with
the employee's spouse. If an employee is married and expects to file a
separate return from the employee's spouse, the employee must select
single or married filing separately filing status on the employee's
withholding allowance certificate.
 (c) Change in filing status--(1) In general. Unless paragraph
(c)(2) of this section applies, the employee must within 10 days
furnish the employer with a new withholding allowance certificate if
the employee's filing status changes--
 (i) From married filing jointly (or qualifying widow(er)) to head
of household, married filing separately, or single, or
 (ii) From head of household to married filing separately or single.
 (2) Exception. If the employee's filing status changes in the
manner described in paragraph (c)(1)(i) or (ii) of this section, but
the total effect of the changes together with other changes affecting
the employee's anticipated tax liability under Subtitle A does not
result in an amount of tax to be deducted and withheld from the
employee's wages for the taxable year that is less than the employee's
anticipated tax liability under Subtitle A, the employee is not
required to furnish a new withholding allowance certificate within 10
days. However, the employee must furnish a new withholding allowance
certificate to take effect the following calendar year by the later of
December 1 of the calendar year in which the employee's filing status
changes, or within 10 days of such change.
[[Page 8370]]
 (d) Determination of marital status. For the purposes of section
3402(l)(2) and paragraph (b) of this section, paragraphs (d)(1) and (2)
of this section shall be applied in determining whether an employee is
a single person or a married person:
 (1) An employee shall on any day be considered as a single person
and not married if--
 (i) The employee is legally separated from the employee's spouse
under a decree of divorce or separate maintenance, or
 (ii) Either the employee or the employee's spouse is, or on any
preceding day within the same calendar year was, a nonresident alien
unless the employee has made or reasonably expects to make an election
under section 6013(g) in the time and manner prescribed in Sec.
1.6013-6(a)(4) of this chapter.
 (2) An employee shall on any day be considered as a married person
if paragraph (d)(1) of this section does not apply and--
 (i) The employee is married within the meaning of Sec. 301.7701-
18(b) of this chapter on the day the withholding allowance certificate
is furnished;
 (ii) The employee's spouse died during the employee's taxable year;
or
 (iii) The employee's spouse died during one of the two taxable
years immediately preceding the current taxable year and, on the basis
of facts existing at the beginning of such day, the employee reasonably
expects, at the close of the taxable year, to be a surviving spouse as
defined in section 2 and Sec. 1.2-2(a) of this chapter. The employee
must reasonably expect to file an income tax return claiming qualifying
widow(er) status.
 (e) Applicability date. The provisions of this section apply on and
after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL
REGISTER]. For rules that apply before [DATE OF PUBLICATION OF FINAL
REGULATIONS IN THE FEDERAL REGISTER], see 26 CFR part 31, revised as of
March 14, 2019. Under section 7805(b)(7) a taxpayer may choose to apply
this section on and after January 1, 2020.
0
Par. 20. Section 31.3402(m)-1 is revised to read as follows:
Sec. 31.3402 (m)-1 Additional withholding allowance.
 (a) In general. In determining the withholding allowance or
additional reductions in withholding under section 3402(m) on employee
withholding allowance certificates furnished to the employer to be
effective on or after January 1, 2020, employees may take into account
the estimated tax deductions described in paragraph (b) of this
section, the estimated tax credits described in paragraph (c) of this
section, and estimated tax payments described in paragraph (d) of this
section. Employees may only claim items in paragraphs (b), (c), and (d)
of this section to the extent provided in paragraph (e) of this
section.
 (b) Estimated tax deductions. Employees may take into account the
following income tax deductions in chapter 1:
 (1) Estimated itemized deductions (as defined in section 63(d))
allowable under chapter 1;
 (2) Estimated deductions described in section 62(a), except for--
 (i) Any deduction described in section 62(a)(1);
 (ii) Any deduction described in section 62(a)(2) if the
reimbursement or payment for the amount allowable as such deduction is
excludable from wages subject to income tax withholding;
 (iii) Any deduction described in section 62(a)(3);
 (iv) Any deduction described in section 62(a)(4); and
 (v) Any deduction described in section 62(a)(5).
 (3) Estimated deductions for net operating loss carryovers under
section 172;
 (4) The estimated aggregate net losses from schedules C (Profit or
Loss from Business), D (Capital Gains and Losses), E (Supplemental
Income and Loss), and F (Profit or Loss from Farming) of Form 1040 and
from the last line of Part II of Form 4797 (Sale of Business Property);
 (5) Estimated additional standard deduction for the aged and blind
provided under section 63(c)(3) and section 63(f);
 (6) Estimated deduction allowed under section 199A; and
 (7) Estimated deduction or deductions allowed under section 151.
 (c) Estimated tax credits. Employees may take into account the
estimated income tax credits allowable under chapter 1, except for--
 (1) The credit under section 31(a) for taxes withheld under chapter
24 (which includes taxes withheld on wages and amounts treated as wages
for chapter 24 purposes, such as pension withholding under section 3405
and backup withholding under section 3406) unless, on the day the
employee estimates this amount, the amount has been actually withheld
from the employee's wages (or another payment treated as wages for this
purpose), the employee enters this amount of tax withheld pursuant to
the instructions in the Tax Withholding Estimator (or successor) or
Publication 505 (or successor), and the employee is not an employee
whose employer must withhold for that employee pursuant to a notice
under Sec. 31.3402(f)(2)-1(g)(2);
 (2) The credit for tax withheld at source for nonresident aliens
and foreign corporations under section 33; and
 (3) Any credit to the extent that the employee has filed or expects
to file any IRS form claiming such credit other than the employee's
United States Individual Income Tax Return (Form 1040).
 (d) Estimated tax payments. Employees may take into account
estimated tax payments paid to date only if--
 (1) The employee's employer is not obligated to withhold on the
employee's wages pursuant to a notice under Sec. 31.3402(f)(2)-
1(g)(2);
 (2) The amount claimed has been paid with the payment voucher from
Form 1040-ES (or was otherwise designated by the taxpayer as a payment
of estimated tax); (3) The employee uses the Tax Withholding Estimator
(or successor) and enters the amount claimed pursuant to the
instructions in the Tax Withholding Estimator (or successor); and
 (4) In using the Tax Withholding Estimator (or successor product),
the employee includes all items of nonwage income the Tax Withholding
Estimator (or successor product) prompts the employee to enter.
 (e) Definitions and special rules--(1) Estimated. The term
``estimated'' as used in this section to modify the terms
``deduction,'' ``deductions,'' ``credits,'' ``losses,'' and ``amount of
decrease'' means with respect to an employee the aggregate dollar
amount of a particular item that the employee reasonably expects will
be allowable to the employee on the employee's income tax return for
the estimation year under the section of the Code specified for each
item. In no event shall that amount exceed the sum of:
 (i) The amount shown for that particular item on the income tax
return that the employee has filed for the taxable year preceding the
estimation year (or, if such return has not yet been filed, then the
income tax return that the employee filed for the taxable year
preceding such year), which amount the employee also reasonably expects
to show on the income tax return for the estimation year, plus
 (ii) The determinable additional amounts (as defined in paragraph
(e)(1)(iii) of this section) for each item for the estimation year.
[[Page 8371]]
 (iii) The determinable additional amounts are amounts that are not
included in paragraph (e)(1)(i) of this section and that are
demonstrably attributable to identifiable events during the estimation
year or the preceding year. Amounts are demonstrably attributable to
identifiable events if they relate to payments already made during the
estimation year, to binding obligations to make payments (including the
payment of taxes) during the year, and to other transactions or
occurrences, the implementation of which has begun and is verifiable at
the time the employee furnishes a withholding allowance certificate.
The estimation year is the taxable year including the day on which the
employee furnishes the withholding allowance certificate to the
employer, except that if the employee furnishes the withholding
allowance certificate to the employer and specifies on the certificate
that the certificate is not to take effect until a specified future
date, the estimation year shall be the taxable year including that
specified future date. It is not reasonable for an employee to include
in his or her withholding computation for the estimation year any
amount that is shown for a particular item on the income tax return
that the employee has filed for the taxable year preceding the
estimation year (or, if such return has not yet been filed, then the
income tax return that the employee filed for the taxable year
preceding such year) and that has been disallowed by the Service as
part of an adjustment described in Sec. 601.103(b) of this chapter
(relating to examination and determination of tax liability) and Sec.
601.105(b) through (d) of this chapter (relating to examination of
returns), without regard to any pending request for reconsideration,
protest, request for consideration by an Appeals office, or civil
action in which such proposed adjustment is at issue.
 (2) Restriction for employees with non-wage income. The employee
must offset any deduction described in paragraph (b) of this section
with items includible in the employee's gross income for which no
Federal income tax is withheld in accordance with forms, instructions,
publications, and other guidance prescribed by the Commissioner. In
addition, an employee whose employer must withhold for that employee
pursuant to a notice under Sec. 31.3402(f)(2)-1(g)(2) must offset any
tax benefit resulting from any deduction or credit described in
paragraph (b) or (c) of this section with the anticipated income tax
attributable to items other than wages includible in the employee's
gross income in the manner determined by the Commissioner.
 (3) Multiple withholding allowance certificates--(i) In general.
The employee may not take into account deductions, credits, or
estimated tax payments described in paragraph (b), (c), or (d) of this
section if these deductions, credits, or estimated tax payments are
claimed on another valid withholding allowance certificate in effect
with respect to another employer of the employee or any employer of the
employee's spouse.
 (ii) Married taxpayers filing jointly. Married taxpayers who
reasonably expect to file as married filing jointly on their federal
income tax return for the estimation year determine the withholding
allowance to which they are entitled under section 3402(m) on the basis
of their combined wages, allowable credits or deductions, and estimated
tax payments permitted to be taken into account. The deductions,
credits, or estimated tax payments described in paragraphs (b), (c),
and (d) of this section to which either spouse is entitled may be
claimed by either spouse or may be allocated between both spouses.
However, one spouse may not claim deductions, credits, or estimated tax
payments described in paragraphs (b), (c), and (d) of this section
claimed on the other spouse's withholding allowance certificate.
 (iii) Married taxpayers filing separately. A married taxpayer who
reasonably expects to file a separate income tax return from the
employee's spouse for the estimation year determines the withholding
allowance deductions, credits, or estimated tax payments described in
paragraphs (b), (c), and (d) of this section on the basis of the
employee's individual wages, deductions, credits, and estimated tax
payments.
 (4) IRS instructions. An employee must follow the instructions to
the Form W-4, and other IRS forms, instructions, publications, and
related guidance in determining the employee's withholding allowance or
other reductions in withholding permitted under section 3402(m) for
deductions, credits, or estimated tax payments described in paragraphs
(b), (c), and (d) of this section.
 (f) Applicability date. The provisions of this section apply on or
after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL
REGISTER]. For rules that apply before [DATE OF PUBLICATION OF FINAL
REGULATIONS IN THE FEDERAL REGISTER], see 26 CFR part 31, revised as of
March 14, 2019. Under section 7805(b)(7) a taxpayer may choose to apply
this section on and after January 1, 2020.
0
Par. 21. Section 31.3402(n)-1 is revised to read as follows:
Sec. 31.3402 (n)-1 Employees incurring no income tax liability.
 (a) In general. Notwithstanding any other provision of this subpart
(except to the extent a payment of wages is subject to withholding
under Sec. 31.3402(g)-1(a)(2)), an employer shall not deduct and
withhold any tax under chapter 24 upon a payment of wages made to an
employee, if there is in effect with respect to the payment a
withholding allowance certificate furnished to the employer by the
employee which certifies that--
 (1) The employee incurred no liability for income tax imposed under
subtitle A of the Internal Revenue Code for the employee's preceding
taxable year; and
 (2) The employee anticipates that the employee will incur no
liability for income tax imposed under subtitle A for the employee's
current taxable year.
 (b) Mandatory flat rate withholding. To the extent wages are
subject to income tax withholding under Sec. 31.3402(g)-1(a)(2), such
wages are subject to such income tax withholding regardless of whether
a withholding allowance certificate under section 3402(n) and this
section has been furnished to the employer.
 (c) Liability for income tax. For purposes of section 3402(n) and
this section, an employee is not considered to incur liability for
income tax imposed under subtitle A if the amount of such tax imposed
is equal to or less than the total amount of credits against such tax
which are allowable under chapter 1 of the Internal Revenue Code, other
than those credits allowable under section 31 or 34. For purposes of
this section, an employee who files a joint return under section 6013
is considered to incur liability for any tax shown on such return. An
employee who is entitled to file a joint return under section 6013
shall not certify that the employee anticipates that he or she will
incur no liability for income tax imposed by subtitle A for the
employee's current taxable year if such statement would not be true in
the event that the employee files a joint return for such year, unless
the employee filed a separate return for the preceding taxable year and
anticipates that the employee will file a separate return for the
current taxable year.
 (d) Rules about withholding allowance certificates. For rules
relating to invalid withholding allowance certificates, see Sec.
31.3402(f)(2)-1(h), and for rules relating to disregarding certain
[[Page 8372]]
withholding allowance certificates on which an employee claims a
complete exemption from withholding, see Sec. 31.3402(f)(2)-1(i).
 (e) Examples. The following examples illustrate this section:
 (1) Example 1. A, an unmarried, calendar-year basis taxpayer,
files an income tax return for 2020 on April 10, 2021, showing that
A had adjusted gross income of $5,000 and is not liable for any
income tax for 2020. A had $180 of income tax withheld during 2020.
A anticipates that A's gross income for 2021 will be approximately
the same amount, and that A will not incur income tax liability for
that year. On April 20, 2021, A commences employment and furnishes
the employer a withholding allowance certificate certifying that A
incurred no liability for income tax imposed under subtitle A for
2020, and that A anticipates that A will incur no liability for
income tax imposed under subtitle A for 2021. A's employer shall not
deduct and withhold on payments of wages made to A on or after April
20, 2021. Under Sec. 31.3402(f)(4)-1(b), unless A furnishes a new
withholding allowance certificate including the certifications
described in paragraph (a) of this section to the employer, the
employer is required to deduct and withhold upon payments of wages
to A made after February 15, 2022.
 (2) Example 2. Assume the facts are the same as in Example 1 in
paragraph (e)(1) of this section except that A had been employed by
the employer prior to April 20, 2021, and had furnished the employer
a withholding allowance certificate prior to furnishing the
withholding allowance certificate including the certifications
described in paragraph (a) of this section on April 20, 2021. Under
Sec. 31.3402(f)(3)-1(b), the employer would be required to give
effect to the new withholding allowance certificate no later than
the beginning of the first payroll period ending (or the first
payment of wages made without regard to a payroll period) on or
after May 20, 2021. However, under Sec. 31.3402(f)(3)-1(b), the
employer could, if it chose, make the new withholding allowance
certificate effective with respect to any payment of wages made on
or after April 20, 2021, and before the effective date mandated by
section 3402(f)(3)(B)(i) and Sec. 31.3402(f)(3)-1(b). Under Sec.
31.3402(f)(4)-1(b), unless A furnishes a new withholding allowance
certificate including the certifications described in Sec.
31.3402(n)-1(a) to A's employer, the employer is required to deduct
and withhold upon payments of wages to A made after February 15,
2022.
 (3) Example 3. Assume the facts are the same as in Example 1 in
paragraph (e)(1) of this section except that for 2020 A has taxable
income of $8,000, income tax liability of $839, and income tax
withheld of $1,195. Although A received a refund of $356 due to
income tax withholding of $1,195, A may not certify on A's
withholding allowance certificate that A incurred no liability for
income tax imposed by subtitle A for 2020.
 (f) Applicability date. The provisions of this section apply on and
after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL
REGISTER].
 For rules that apply before [DATE OF PUBLICATION OF FINAL
REGULATIONS IN THE FEDERAL REGISTER], see 26 CFR part 31, revised as of
March 14, 2019. Under section 7805(b)(7) a taxpayer may choose to apply
this section on and after January 1, 2020.
Sunita Lough,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2020-02849 Filed 2-11-20; 4:15 pm]
 BILLING CODE 4830-01-P