DFA: Arkansas paychecks may increase due to adjusted income tax tables

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LITTLE ROCK, Ark.- The Arkansas Department of Finance and Administration (DFA) announced to the state’s approximately 80,000 employers that the income tax withholding tables will change effective January 1, 2021. As a result, Arkansans may see an increase in the amount of their paychecks.

This is the second change DFA has recently implemented to the withholding tables. The first adjustment happened on March 1, 2020. That adjustment put $15 million each month into the pockets of Arkansans via increased paychecks. The January 2021 adjustment will place an additional $7 million each month into paychecks.

The withholding change is not a tax increase or cut, but with the law change that reduces the top personal income tax rate from 6.6% to 5.9% next month, the withholding change will put that reduction in paychecks beginning January 2021.  Without this change, many Arkansans wouldn’t see the bulk of their tax cut until they received it in their tax refund in 2022.  

“Due to three considerable income tax cuts established by the legislature and Governor Hutchinson, it is again appropriate to adjust withholding tables to correspond with the lower tax rates,” said Charlie Collins, DFA’s Commissioner of Revenue. “Employees that wish to maintain a higher annual tax refund can simply ask their employer to adjust the AR4EC form to increase the amount withheld each paycheck. This gives Arkansans the option of a larger annual refund versus a paycheck increase.”

Employers can find the new tables at http://ar.gov/WithholdingTaxTables.

Additional information on DFA can be found at www.dfa.arkansas.gov.

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