As part of its ongoing efforts to help implement the new tax legislation, the IRS has released an updated version of the tables used to calculate 2018 income-tax withholding for individuals. The new calculations reflect the changes to standard deductions and tax brackets, as well as the repeal of personal exemptions. The guidance released by the IRS also includes a lower flat rate for use in withholding taxes on “supplemental wages” (such as bonuses).
Employers are instructed to begin using the new calculations as soon as possible, but no later than February 15, 2018. The new tables are designed to work with the Form W-4 that employees have already submitted previously to their employers, so no action is required on the part of employees at this time. Additional IRS guidance is being developed, and as it becomes available, individual taxpayers will need to ensure that the updated withholding amounts are appropriate for their personal situation.
The IRS has announced that it will issue a revised Form W-4 that better reflects the law changes and will also update the withholding calculator tool on its website. No precise date was given for when these updates will be complete, although the IRS said it expects the new calculator to be available by the end of February. If you would like further information, please do not hesitate to contact your Hertzbach tax advisor at 410-363-3200.