The IRS recently released a new Form W-4 and an updated withholding calculator for 2018 personal income tax withholding. This much-anticipated information from the IRS is the final component of withholding guidance released in January. Now employers and employees have the full suite of tools at their disposal to review and update withholding as needed post-tax reform. The IRS does not require all employees to complete a new Form W-4 for 2018; however, it may be advisable for some individuals based on their personal tax situation.
Calculate Tax Reform Impact on Withholding
The Tax Cuts and Jobs Act contained a number of changes to individual taxation, including a reduction in tax rates and brackets, the elimination of personal exemptions and an increase or adjustment to certain deductions and credits. In light of this shifting tax landscape, an individual’s tax return for 2018 may look very different from 2017.
The IRS offers a withholding calculator on its website to help taxpayers review their paychecks and ensure the necessary amount is being withheld in the context of their personal circumstances. It is not necessary to have completed your 2017 return to use the calculator, though it can be a handy guide when using the tool.
Updated W-4 and Employer’s Supplemental Guide Now Available
If employees need to adjust withholding to accommodate tax reform changes or events in their personal life, the calculator provides information that can then be used to complete a new W-4 for submission to their employer.
The IRS also provided additional guidance for employers through 2018 Publication 15-A, which supplements the 2018 Employer’s Tax Guide issued in January and covers essential topics for employers like worker status, third-party sick-pay reporting and alternate withholding calculation methods.
RKL’s small business advisors stand ready to help employers adapt to the new withholding landscape – contact us with questions on this or any other aspect of tax reform impact. To view RKL’s full suite of tax reform insights and information, visit our dedicated resource center.
Contributed by Tina Dodson, CPP, EA, in RKL’s Small Business Services Group. Tina has two decades of experience helping small business owners and their management teams meet their financial reporting and individual and corporate tax return preparation needs.