In response to last year’s tax reform legislation, the IRS updated the income-tax withholding tables for 2018. The IRS states this is the first in a series of steps to improve withholding accuracy under the new tax law.

What does this latest development mean for you, the employer — and for your employees’ W-4s? Here are four tips for responding to the changes and keeping your W-4 paperwork up to date:

  1. Use the new income-tax withholding tables ASAP – Notice 1036, posted on IRS.gov, breaks down the new tables for employers to use for 2018. Employers should have begun incorporating the 2018 withholding tables by Feb. 15, 2018. The modified tables include a handful of changes affecting individual taxpayers, including an increase in the standard deduction, repeal of personal exemptions, and changes in tax rates and brackets.
  2. An IRS withholding table shows how much tax to withhold from an employee’s paycheck, based on the employee’s wages, marital status and number of claimed allowances.
  3. Inform employees they may see a change in their paychecks – The time it takes for employees to see an increase in their paychecks will vary, depending on how quickly you incorporate the new rates — and your pay period frequency, generally weekly, biweekly or monthly. Assuming you began using the new rates by mid-February, employees can expect changes in the weeks following.
  4. Refer employees to the IRS withholding calculator for a “paycheck checkup” – The new withholding tables are designed to work with the W-4s already on file with your business. Although employees don’t need to do anything further at this time, they may be interested in seeing how the numbers play out. You can direct them to the online IRS withholding calculator to learn more. This easy-to-use tool can help workers determine if they should adjust their withholding so they don’t have too much (or too little) taken out of their pay.
  5. Allow employees to update their withholding amount, if desired, but don’t offer advice – As we shared in an earlier article, it’s important to not overstep the boundaries between complying with IRS requirements and providing W-4 instruction. Although you can explain to a new or existing employee the purpose of the W-4, you can’t influence their withholding decisions. It’s ultimately the employee’s choice. Keep in mind, too, that employees can update their W-4s for a variety of personal or financial reasons, such as marriage, divorce, a change in dependents or a significant salary increase. Current employees who come to you to complete a new W-4 to adjust their 2018 withholding will want to check their withholding again in early 2019.

We’ll Keep You Informed

In addition to an updated withholding calculator on its website, the IRS released the 2018 W-4 on February 28. If you’re already using the I-9 & W-4 app as part of your onboarding process with new employees, you’re all set. The app features the latest version of the W-4, per our commitment to keeping customers compliant with ever-evolving state and federal requirements.

Along with providing an automated, paperless process with the federally required I-9 and W-4, the app includes notifications of changes and other helpful resources to answer your questions. It also features instructional guidance to ensure employees correctly fill out W-4s on their own.

Key Takeaways
  • The IRS updated the income-tax withholding tables to include the 2017 tax reform bill
  • Employers should incorporate the new 2018 withholding tables by February 15, 2018
  • Employees can expect to see paycheck increases in the weeks after employer action
  • Employees aren’t required to change their W-4s, but may choose to do so after checking their withholding with the IRS
  • The IRS released a new 2018 W-4 on February 28, which is included in the fully compliant 1-9 & W-4 app
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