Workforce Today® 1/22/2018
New Federal Withholding Tables
On January 11, 2018, the Internal Revenue Service released Notice 1036, which updates the income-tax withholding tables for 2018 reflecting changes made by the tax reform legislation enacted last month. The IRS reports that this is the first in a series of steps that the IRS will take to help improve the accuracy of withholding following major changes made by the new tax law.
The new withholding tables are designed to work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances. This will minimize the burden on taxpayers and employers. Employees are not required to do anything at this time. However, employees should review their withholding status as they could be under-withheld if they claim a significant number of withholding allowances or have more complicated tax situations. Note that the flat withholding rate on supplemental wages of $1 million or less during the calendar year has decreased from 25% to 22% and the mandatory supplemental wage rate on payments totaling over $1 million during the calendar year has decreased from 39.6% to 37%.
The new withholding tables have been implemented by effective January 21, 2018 and will be reflected in your employee paychecks.
The IRS continues to work on more detailed withholding information, which will be available soon in Publication 15 and related publications. For additional information visit the IRS website.