Making Work Pay Questions and Answers: New Withholding Tables

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Update July 3, 2014 — Publication 15-T has been obsoleted.

Q1. Since the Making Work Pay credit does not apply to non-resident aliens, should the previous percentage method tables continue to be used?

A. The old tables are to be replaced by the applicable new tables for all purposes. There are new higher amounts to be added to the pay of nonresident aliens to figure their income tax withholding. See IRS Publication 15-T for more information.

Q2. Since an equivalent to the Making Work Pay credit applies to residents of American Samoa, Guam, Northern Mariana and the U.S. Virgin Islands, should the new tables be used for these territories?

A. The territories with tax codes that "mirror" the Internal Revenue Code (United States Virgin Islands, Guam and the Commonwealth of the Northern Mariana Islands) will use the new withholding tables. For "non-mirror" possessions (Puerto Rico and American Samoa), payment will be made by the territories in a manner consistent with a plan approved by the Secretary of the Treasury. U.S. territory residents in those jurisdictions should contact their local tax agency for questions or concerns regarding implementation of the American Recovery and Reinvestment Act of 2009. 

Q3. Do the new IRS tax withholding tables (Publication 15-T) apply to public pension benefit recipients and their pension income? 

A. The new withholding tables are applicable to certain pension payments unless the recipient has elected no withholding. However, pension payments are not considered earned income for purposes of the credit. Consequently, a pension recipient with no earned income would not be eligible for the credit and may not have enough withheld from their pension benefits to cover their tax liability on those payments. It is recommended that pension recipients evaluate their expected tax liability for the year and consider whether they need to make estimated tax payments or adjust their withholding on Form W-4PPDF, Withholding Certificate for Pension or Annuity Payments.

Q4. What is the effective date for all employers to begin using the new tax tables?

A. The IRS asks that employers start using these new tables as soon as possible, but no later than April 1, 2009.

Q5.  If an employer does not have an employee’s Social Security number, should they be calculating their withholding using the new tables that reflect the credit? 

A.  The old tables have been replaced by the applicable new tables for all purposes. See Publication 15-T for more information. The new tables did not modify any of the rules regarding valid or effective Forms W-4.

Q6.  Currently, for purposes of supplemental withholding, the optional flat rate is the third rate in the withholding tables (25 percent) and the mandatory flat rate is the highest withholding rate in the withholding tables (35 percent). Will the optional and mandatory supplemental withholding rates remain unchanged for 2009?

A. Yes. We are not aware of any changes to the optional and mandatory supplemental withholding rates for 2009 at this time.

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