To comply with the 2017 Tax Bill signed into law in December by President Donald Trump, the IRS on Jan. 11 issued revised income tax withholding tables for employee paychecks.
“Employers should implement the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018,” states the IRS in Publication 15 (Circular E), Employer’s Tax Guide, which provides the percentage method tables for income tax withholding. Specifically, these tables show employers or payroll service providers how much tax to withhold from employee paychecks in 2018 according to an employee’s wages, marital status and number of withholding allowances claimed and according to type of payroll period, i.e., biweekly or semimonthly.
In addition to changing the tax rates and tax brackets for individual taxpayers, the tax act increased the standard deduction for individuals who do not itemize deductions and repealed the personal exemptions deduction. Employees should begin to see withholding changes in their paychecks in February, with the exact date depending both on when the employer implements the change (no later than Feb. 15) and what type of payroll period the employer uses.
A new Form W-4 reflecting these changes will eventually be released by the IRS, but until that time employers and their employees should continue to use the 2017 form.
“The new withholding tables are designed to minimize taxpayer burden as much as possible and will work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances,” states the IRS in an FAQ about the new withholding tables posted on its website. “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.”
The IRS is in the process of revising its tax withholding calculator, which employees can use to help them adjust their withholding. Once updated, the calculator will be available at irs.gov.
In addition to providing the new income tax withholding tables, Publication 15 explains the employer’s tax responsibilities, including withholding, depositing, reporting and paying requirements.