Adjusting Tax Withholding According to the New Tax Bill
The U.S. Treasury estimates that 90 percent of U.S. workers will see an increase in their take-home pay in 2018, thanks to the new, lower individual tax rates that was implemented in line with the massive $1.5 trillion tax overhaul bill signed by President Trump in late December of 2017.
As an employer, you have until February 15 to begin using the new withholding tables (Notice 1036) to withhold from your employees’ income, which will remain in effect through 2025. If you use a payroll company, it’s critical that you make sure that they adjust your employees’ withholding rates before the deadline.
If you use our payroll services, you will not need to take any action, as we have already updated your employees’ tax withholding rates well ahead of the deadline. We pride ourselves on our speedy service and commitment to industry guidelines. We immediately set to adjusting the rates so your employees can begin receiving more take-home pay as soon as possible. Any payroll processed from January 26 and on will have the new tax brackets.
Employees asking for more information on how soon they can expect to see paycheck changes should be directed to the IRS page. The IRS states:
“Many employees will begin to see increases in their paychecks to reflect the new law in February. The time it will take for employees to see the changes in their paychecks will vary depending on how quickly the new tables are implemented by their employers and how often they are paid — generally weekly, biweekly or monthly.”
If your employees wish to update their withholding in response to the new law or changes in their personal circumstances in 2018, the IRS is working on revising the W-4 Form. Until a new Form W-4 is issued, employees and employers should continue to use the 2017 Form W-4.
There are a number of other tax changes individual taxpayers should be aware of, including the elimination of personal exemptions, an increase in the standard deduction, increases in the child tax credit, and the new dependent credit. These will also remain in effect through 2025.
To help people determine their withholding, the IRS is revising the withholding tax calculator on IRS.gov. The IRS anticipates this calculator should be available by the end of February.
The law does not change how much employers deduct for Social Security and Medicare. The sooner employers incorporate the new guidelines, the more confident they can be in their legal compliance with this new tax law.