On Jan­u­ary 11, 2018, the Inter­nal Rev­enue Ser­vice released its income tax with­hold­ing tables for 2018 reflect­ing changes made by the Decem­ber 2017 tax reform leg­is­la­tion. The updat­ed with­hold­ing infor­ma­tion pro­vides the new rates for employ­ers to use dur­ing 2018. Employ­ers are encour­aged to use these tables as soon as pos­si­ble but must use them by no lat­er than Feb­ru­ary 15, 2018. Employ­ers should con­tin­ue to use the 2017 with­hold­ing tables until they imple­ment the 2018 with­hold­ing tables.

Accord­ing to the U.S. Trea­sury, an esti­mat­ed 90 per­cent of pay­check recip­i­ents are like­ly to see an increase in their take-home pay by Feb­ru­ary. How­ev­er, when employ­ees see these changes in their pay­checks depends on how quick­ly the new tables are imple­ment­ed by their employ­ers and how often they are paid (usu­al­ly week­ly, biweek­ly, or semimonthly).

To help indi­vid­u­als iden­ti­fy the cor­rect amount of with­hold­ing, the IRS is releas­ing a revised with­hold­ing cal­cu­la­tor by the end of Feb­ru­ary, which will be post­ed on IRS.gov. The IRS encour­ages tax­pay­ers to use the cal­cu­la­tor to adjust their with­hold­ing once it is released.

Changes for 2018 and Looking Forward

The new law makes many changes for 2018 that affect indi­vid­ual tax­pay­ers, includ­ing an increase in the stan­dard deduc­tion, repeal of per­son­al exemp­tions, and changes in tax rates and brack­ets. In rela­tion to Form W‑4, these new with­hold­ing tables are designed to work with employ­ees’ cur­rent W‑4, as filed with their employ­er; so, there are no steps employ­ees must cur­rent­ly take regard­ing the new tables and law.

The IRS is also work­ing on revis­ing the Form W‑4 to reflect the new­ly avail­able item­ized deduc­tions, increas­es in the child tax cred­it, the new depen­dent cred­it, and repeal of depen­dent exemp­tions. How­ev­er, there is no set release date for the revised form.

Once released, employ­ees may use the new Form W‑4 to update their with­hold­ing in response to the new law or changes in their per­son­al cir­cum­stances in 2018, and by work­ers start­ing a new job. Until a new Form W‑4 is issued, employ­ees and employ­ers should con­tin­ue to use the 2017 Form W‑4.

For Now

At this time, employ­ers should be review­ing these new tables and imple­ment­ing nec­es­sary changes. For 2019, the IRS has said that it antic­i­pates mak­ing even more changes involv­ing with­hold­ing. But don’t despair; the agency pro­vides FAQs, which employ­ers and employ­ee may find use­ful, and pledges to work with the busi­ness and pay­roll com­mu­ni­ty to encour­age work­ers to file new Forms W‑4 next year while shar­ing infor­ma­tion on changes in the new tax law that impact withholding.

Stay tuned though, because 2018 has only just begun.

By Saman­tha Yurman

Orig­i­nal­ly pub­lished by www.ThinkHR.com