Our February 1, 2018 blog post reported on the late February release of the Form W‑4 and guidance on the income withholding rules that changed under the Tax Cuts and Jobs Act. On February 28, 2018, the federal Internal Revenue Service (IRS) released the new 2018 Form W‑4 and an updated withholding calculator.
Why a Withholding Calculator?
The IRS encourages the use of the withholding calculator for a quick paycheck checkup in light of the changes to the tax law for 2018. According to the IRS, employees may be encouraged to use the calculator to ensure the correct tax amount is being withheld from their paychecks. For example, reviewing withholding may help protect employees against having too little tax withheld and facing an unexpected tax bill or penalty during next year’s tax season. Alternatively, with the average refund being $2,800, the IRS anticipates that some employees may have less tax withheld up front and instead receive more in their paychecks. If an employee needs to make changes to his or her withholding, the calculator provides the necessary information to fill out a new W‑4.
Make sure your employees know about the availability of the calculator. Only employees changing their withholding need to complete a new W‑4, and they may use results from the calculator to complete the new form. Encourage those employees to submit updated W‑4s as soon as possible to ensure their withholdings are accurate.
The IRS also suggests that if employees follow the calculator’s recommendations and change their 2018 withholding, they should recheck their withholding at the beginning of 2019 to protect against having too little withheld. This is important where an employee reduces his or her withholding sometime during 2018 because a mid-year withholding change in 2018 may have a different full-year impact in 2019.
Get it All
More information is available at the IRS page, Withholding Calculator Frequently Asked Questions.
Learn more about the Tax Cuts and Jobs Act.
By Samantha Yurman
Originally published by www.ThinkHR.com