On January 11, 2018, the Internal Revenue Service (IRS) released Notice 1036, which updates the income tax withholding tables for 2018 and reflects changes made by the tax reform legislation enacted last month. The updated withholding information shows the new rates for employers to use during 2018. According to the IRS, employers should begin using the 2018 withholding tables as soon as possible, but by no later than February 15, 2018. Employers should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.
The new withholding tables are designed to work with the Forms W-4 that employees have already filed with their employers to claim withholding allowances (employees do not need to complete new W-4s). This will minimize burden on both taxpayers and employers.
The new law makes a number of changes for 2018 that affect individual taxpayers. The new tables reflect the increase in the standard deduction, repeal of personal exemptions, and changes in tax rates and brackets. The revisions are also aimed at avoiding over-and under-withholding of tax as much as possible.
The IRS is also working on revising the Form W-4. Form W-4 and the revised calculator will reflect additional changes in the new law, such as changes in available itemized deductions, increases in the child tax credit, the new dependent credit, and repeal of dependent exemptions.
The calculator and new Form W-4 can be used by employees who wish to update their withholding in response to the new law or changes in their personal circumstances in 2018, and by those starting a new job. Until a new Form W-4 is issued, employees and employers should continue to use the 2017 Form W-4.
For 2019, the IRS anticipates making further changes involving withholding. The IRS will work with the business and payroll community to encourage workers to file new Forms W-4 next year and share information on changes in the new tax law that impact withholding.
Additional Resources:
- Withholding Tables Frequently Asked Questions.
- CGO's Compliance Bulletin: "IRS Issues New Tables for 2018 Tax Withholding."
Source: ThinkHR
