What happened?

On July 15, 2024, the Department of Finance and Administration (DFA) announced that the Income Tax Withholding Tables were adjusted due to cuts.

Quick Summary:

• Arkansas revised its income tax withholding tables and reduced the supplemental wage tax rate from 4.4% to 3.9%, effectively retroactively from January 1, 2024.

• These changes, resulting from House Bill 1001, aim to provide tax relief and simplify the withholding process for employers and employees.

What are the details?

• Effective Retroactively from January 1, 2024:
  
  • Supplemental Wage Tax Rate: The rate for withholding bonuses and other irregular wage payments has been reduced from 4.4% to 3.9%.
  • Income Tax Withholding Tables: The Arkansas Department of Finance and Administration (DFA) has updated the withholding tables to reflect recent tax cuts. These changes impact approximately 80,000 employers in the state.
  • Standard Deduction: The standard deduction amount has been increased from $2,270 to $2,340.

• Implementation Details:
  
  • The Division of Taxation (DOT) has issued updated tax instructions, withholding tables, and formulas for employers, including specific tables for low-income wage earners. These tables should be used starting from July 1, 2024.

• Legislative Background:
  
  • The changes stem from House Bill 1001 (H.B. 1001), signed into law by Governor Sarah Huckabee Sanders on June 19, 2024.
  • This bill reduces the state’s highest income tax rate from 4.4% to 3.9% and adjusts the tax brackets accordingly. It also lowers the corporate tax rate from 4.8% to 4.3%.

Business Considerations

• Employers should update payroll systems to reflect the new supplemental wage tax rate of 3.9% for bonuses and irregular wage payments, effective retroactively from January 1, 2024.
  
• Employers should implement new withholding tables provided by the Arkansas Department of Finance and Administration starting from July 1, 2024.
  
• Employers should review withholding instructions and follow the updated tax instructions and formulas issued by the Division of Taxation to ensure compliance.

Source References

• AR Announcement: Income tax withholding tables adjusted due to most recent tax cut
• AR Withholding Tax Forms and Instructions
• H.B. 1001

Resources

• 2024 Withholding Tax Instructions 3.9%
• 2024 Withholding Regular Tax Tables 3.9%
• 2024 Withholding Tax Formula 3.9%
• 2024 Withholding Low Tax Tables 3.9%

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