Written by: Natasha Swan, Executive Assistant and Payroll Specialist
The IRS has released a new version of Form W-4 and an updated Withholding Calculator on its website, to help taxpayers check their 2018 withholding in light of changes made by the “Tax Cuts and Jobs Act”. The IRS has also issued a series of frequently asked questions (FAQs) on the withholding calculator.
The Tax Cuts and Jobs Act made major tax law changes for individuals, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions, and changing the tax rates and brackets, effective for tax years beginning after December 31, 2017 and before January 1, 2026.
On January 11, 2018, the IRS issued 2018 withholding tables that reflect the Tax Cuts and Jobs Act. Employers were instructed to begin using the 2018 withholding tables as soon as possible, but not later than February 15, 2018.
The updated withholding tables are designed to work with existing W-4s that employers have on file, but many taxpayers (such as those with children or multiple jobs, and those who itemized deductions under prior law) are affected by the new law in ways that can't be accounted for in the new withholding tables. The IRS is encouraging taxpayers to use the Withholding Calculator to make sure they have the right amount of taxes withheld and fill out a new Form W-4 if any changes need to be made to their withholding and submit to their employer.
The withholding changes do not affect taxpayer’s 2017 income tax returns due this April 2018. However, having a completed 2017 tax return can help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018 and avoid issues when they file next year.