2021 brings potential increase in Arkansans’ paychecks

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Department of Finance and Administration adjusts income tax withholding tables / In total, paychecks in Arkansas will increase by $7 million each month

LITTLE ROCK, Ark. — To ring in 2021, Arkansans may see a little boost in their paychecks thanks to changes in the state’s income tax withholding tables.

Last month, the Arkansas Department of Finance and Administration (DFA) announced to the state’s approximately 80,000 employers that the income tax withholding tables would change effective Jan. 1, 2021. As a result, Arkansans may see an increase in the amount of their paychecks, the DFA said in a press release.

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

This 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 percent to 5.9 percent, 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, the DFA said.

“Due to three considerable income tax cuts established by the legislature and Gov. 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.”

The law that reduced the tax rate was Act 182 passed by the 92nd General Assembly, the Arkansas House of Representatives said in a December press release.

The release from the House noted it anticipates the 93rd General Assembly will address further tax cut proposals.

Several pieces of legislation addressing future tax cuts have been filed in advance of the 2021 Regular Session, which begins on Jan. 11.

Employers may find the new tables at ar.gov/WithholdingTaxTables.

Additional information on DFA may be found at dfa.arkansas.gov.


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