The IRS recently released Notice 1036 which updates the income tax withholding tables for 2018, reflecting changes made by the Tax Cuts and Jobs Act released last month. This is the first in a series of steps that IRS will take to help improve the accuracy of withholding following major changes made by the TCJA.

Withholding Tables 2018- Frequently Asked Questions

What are the withholding tables?

A withholding table shows payroll service providers and employers how much tax to withhold from employee paychecks, given each employee’s wages, marital status and the number of withholding allowances they claim.

What is a form W-4?

This is a form that employees fill out and give to employers, to determine the amount of federal income tax to withhold from the employees’ paychecks. Withholding can be adjusted based around the employee’s personal circumstances, such as children, or a spouse who works.

Why are these changes being made?

Given recent changes in tax rates and tax brackets, the withholding tables needed to be updated. The new tables reflect the increase in the standard deduction, the repeal of personal exemptions, and new tax rates and brackets. They are designed to produce the correct amount of tax withholding in order to avoid over and under withholding tax. Employers must make changes to their existing payroll systems and the new tables are designed to work with existing Form W-4s that employees have on file (so no, workers do not need to file new W-4s).

When should employers begin using the new tables?

Employers should begin using the 2018 withholding tables as soon as possible, but no later than February 15, 2018.

When should taxpayers see changes to their paychecks?

The IRS says many employees should begin to see their take home pay increase in February depending on how quickly their employers implement the new tables and whether they are paid every week, biweekly, or monthly.

Is anyone at risk of being under withheld on their taxes with the changes to the withholding tables?

While most people are what’s called “over-withheld” on their taxes, meaning that more taxes are held out of their paychecks than what they owe, some people are “under-withheld”. This means that the taxpayer will have a balance due at the time of filing. The IRS recommends that those with more than one income in their household double check their withholding, as well as those who itemize deductions.

How can you check your withholding status?

Yes—the IRS is revising their “withholding tax calculator” which helps employees estimate their paycheck withholdings, and also helps those who wish to update their withholding status. When the new information is available in February, the IRS will help educate taxpayers about the new withholding guidelines and the updated calculator.

I don’t have to file a new Form W-4 this year, but will I have to in 2019?

The IRS anticipates making more changes to withholding next year. They will work with businesses and payroll departments to encourage workers to file new forms in 2019 and share information on changes in the new tax law that impact existing practices.

Access the withholding tables here: https://www.irs.gov/pub/irs-pdf/n1036.pdf

Questions on the new tables? Contact our Tax Services Team.