IRS withholding tables apply to dependent workers and pensioners. Find out how much you will discount in 2023.
At withholding tables for 2023 underwent some adjustments in relation to the initial version, published in December 2022. The new version, dated January 25, is already in effect. In the second half of the year, a new model of tables arrives, so the current ones are only in force until June 30th.
It should be recalled that the first version, which came into force on January 1, meant that some contributors who had had salary increases ended up receiving less than in the previous year, given that the retention rate was higher. In other words, the tax withheld ended up absorbing this increase. Hence the need to make corrections. Find out, then, what changes now and what will change on July 1st.
Withholding tables: how do they work?
At withholding tables are related to the collection of Personal Income Tax (IRS). They break down the percentages that affect the workers’ gross salary and that the employer pays directly to the State, as a form of early settlement of the tax.
That is, they determine the amount of IRS you will pay monthly. The final settlement is made in the following year, after the delivery of the IRS declaration and the application of all the deductions to which you are entitled. It is at that time that the taxpayer will know if he overpaid (and therefore will be entitled to a refund) or if he still has tax to pay.
IRS withholding tables for 2023
The withholding rate to be applied depends on several factors, including: gross salary (or pension), the taxpayer’s family situation (married, single, with or without children) and, if married, whether the household has a or two income holders.
To find out how much you will deduct from the IRS every month, as early as 2023, consult or download the new withholding tax tables from the link below, as set out in Order No. 1296-B/2023, of January 25th.
The withholding tables that will be in force in the first half of 2023 seek to continue the adjustment between the tax that is withheld and the one that the taxpayer actually has to pay.
This approach will, on the one hand, increase disposable income and, on the other hand, reduce IRS refunds.
What were the corrections to the withholding tables?
Thus, the current tables already reflect the additional adjustments that had to be made to correct situations in which the salary increase was absorbed by the retention rate.
The amendments concern the income from dependent work up to 964 euros per month, without dependents. The tables relating to income from dependent work earned by the disabled are still in force, as well as the tables covering pension income and which had already been published.
The withholding tax tables are exemption limit 762 euros per month, reflecting the application of the existence minimum. That is, those who receive up to that amount do not have to deduct it from the IRS.
The changes come at a time when January and February salaries have already been processed, but are retroactive to January.
What changes in July 2023?
As of July 1, 2023, a new model of withholding tables comes into effect. At tables for the second half of the year follow a logic similar to that of the IRS levels, with the application of a marginal rate.
The objective is that there is harmony between the withholding tables and the IRS levels that avoid regressive situations. That is, cases in which an increase in gross salary ends up resulting in a decrease in net salary.
HOW DO I CONSULT THE WITHHOLDING TABLES?
Let’s take as an example a single worker, without children, who earns 1,000 euros gross per month (14,000 euros/year). To identify the applicable withholding tax, proceed as follows:
- Identify the table corresponding to the combination “dependent job” and “not married”;
- In the column on the left, choose the salary range in which the gross monthly income is inserted. So, in this case, as the remuneration is 1,000 euros, you must choose the line up to 1,051 euros;
- You must then follow that line until you come across the column relating to the number of dependents you are responsible for. As the taxpayer has no dependents, he must choose “0”. The withholding rate to be applied is then 11.2%.
Article originally published in January 2020. Last updated in January 2023.