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.

Next Steps

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