IRS Releases New 2018 Withholding Tables; Payroll Changes Required by February 15, 2018

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February 15, 2018

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On January 11, 2018, the Internal Revenue Service (“IRS”) released Notice 1036, which updates the 2018 income tax withholding tables in accordance with the recently enacted tax reform legislation. Employers should begin using the 2018 withholding rates as soon as possible, but no later than February 15, 2018.

The tax withholding tables indicate how much tax should be withheld from an employee’s paycheck, depending on the employee’s wages, marital status and number of allowances.  The updated tables reflect the increase in the standard deduction amount, the repeal of personal exemptions, and the changes in tax rates and brackets.

A 2018 version of the Form W-4 is not yet available. The IRS is currently working on revising Form W-4 to reflect other changes imposed by the tax reform, including: changes in available itemized deductions, increases in the child tax credit, new dependent credit, and repeal of dependent exemptions. Once available, employees may complete a new Form W-4 in order to update their withholding choices, but until then, employers should continue to use the existing 2017 Form W-4.

In addition to the new Form W-4, the IRS is developing an updated tax withholding calculator. The calculator is intended to help employees update their withholdings and is anticipated to be available on the IRS website by the end of February.

Action Items

  1. Review Notice 1036.
  2. Coordinate with your payroll processor to incorporate the changes in deductions, exemptions, and tax rates/brackets.
  3. ManagEase will report when the 2018 W-4 is available. Once available, provide employees the opportunity to revise their withholdings.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2018 ManagEase

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