If you’ve been get­ting ques­tions from your employ­ees about com­plet­ing new 2018 W‑4 forms to take advan­tage of the tax reform rules, we’ve final­ly received some answers. You can con­tin­ue to rely on the cur­rent W‑4 forms for now until the new 2018 form is released in late February.

The Jan­u­ary 29th Inter­nal Rev­enue Ser­vice (IRS) Notice 2018–14 pro­vides addi­tion­al guid­ance on the income with­hold­ing rules that were changed under the recent­ly passed Tax Cuts and Jobs Act. The guidance:

  • Extends the effec­tive peri­od of Forms W‑4 fur­nished to claim exemp­tion from with­hold­ing for 2017 until Feb­ru­ary 28, 2018.
  • Per­mits employ­ees to claim exemp­tion from with­hold­ing for 2018 by tem­porar­i­ly using the 2017 Form W‑4. This pro­ce­dure will expire 30 days after the 2018 Form W‑4 is released.
  • States that employ­ees expe­ri­enc­ing a change in sta­tus that caus­es a reduc­tion in the num­ber of with­hold­ing exemp­tions are not required to fur­nish employ­ers with new with­hold­ing cer­tifi­cates until 30 days after the 2018 Form W‑4 is released.
  • Pro­vides that employ­ees who have a reduc­tion in the num­ber of with­hold­ing allowances sole­ly due to changes made by the Tax Cuts and Jobs Act are not required to fur­nish employ­ers with new with­hold­ing cer­tifi­cates dur­ing 2018. How­ev­er, employ­ees may choose to update their with­hold­ing at any time in response to the act. Employ­ees who choose to update their with­hold­ing may use the 2017 Form W‑4 instead of the 2018 Form W‑4 to report changes in with­hold­ing allowances until 30 days after the 2018 Form W‑4 is released.
  • Con­firms that the option­al with­hold­ing rate on sup­ple­men­tal wage pay­ments is 22 per­cent for 2018 through 2025.
  • Spec­i­fies that, for 2018, with­hold­ing under IRC 3405(a)(4) on peri­od­ic pay­ments when no with­hold­ing cer­tifi­cate is in effect will be based on treat­ing the pay­ee as a mar­ried indi­vid­ual claim­ing three with­hold­ing allowances.

In addi­tion to the guid­ance, the IRS also released a new Pub­li­ca­tion 15, (Cir­cu­lar E), Employ­er Tax Guide, for 2018. Pub­li­ca­tion 15 includes the 2018 with­hold­ing tables and explains an employer’s tax respon­si­bil­i­ties, such as with­hold­ing, deposit­ing, report­ing, pay­ing, and cor­rect­ing employ­ment taxes.

ThinkHR will con­tin­ue to fol­low devel­op­ments in this area and report on the avail­abil­i­ty of the new 2018 W‑4 Form and oth­er IRS guid­ance as it becomes available.

By Rick Montgomery

Orig­i­nal­ly pub­lished by www.ThinkHR.com