As the Tax Cuts and Jobs Act begins to take effect, the Treasury Department and IRS has new guidance to help employers manage employee payroll systems.
Following on the heels of last month’s $1.5 trillion tax reform overhaul, the Treasury Department and Internal Revenue Service released new guidance to help employers manage and update their employee payroll systems as the Tax Cuts and Jobs Act begins to take effect.
The sweeping changes to the tax code should result in more take-home pay for approximately 90 percent of employees throughout the United States.
The new guidelines adjust how much income tax must be taken out of employees’ paychecks after taking into account exemptions claimed by employees on their IRS Form W-4, filed with their employers to help determine withholding.
On Jan. 11, the IRS published Notice 1036, as a first step to help improve the accuracy of employee withholdings. According to the IRS, employers should begin using the 2018 withholding tables as soon as possible, but no later than Feb. 15.
Individual taxpayers aren’t required to make any changes to their W-4 forms right now, but the IRS expects many taxpayers will have to do so when the agency releases a revised version of the form later this year. Employees and employers should continue to use the 2017 version until the IRS issues the new one.
The IRS also plans to release a new tax-withholding calculator on its website late next month to help individual taxpayers determine the correct amount of withholding. The calculator and new W-4 form can be used by recent hires and employees who wish to update their withholding forms in response to the new law or changes in their personal circumstances in 2018.
For more information on the IRS’ withholding tables, go here.