Is it time for employees to revise their W-4's?
*UPDATE: New withholdingforms havebeenreleased byboth the federal government and New York. These forms are available for HR One clients to download in the "Forms" section of the site in the New Hire Packet once you login above.*
The IRS has released updated tax withholding tables for 2018, a response to the Tax Cut and Jobs Act. The tables were updated to reflect some of the changes contained in the tax law, which includes raising the standard deduction, repealing personal exemptions, and changes to tax rates and brackets.
Why does this matter?
Withholding is how individuals and families can pay their tax liability in a predictable way each year, and do their best to neutralize their tax liability when they file. Withhold too little and you’ll end up owing additional taxes to the government. Withhold too much and you’ll receive a refund, but that’s money that could have otherwise been saved or spent throughout the year. Because of the changes in the tax laws, the withholding procedures need to be updated in order to make sure taxpayers are able to neutralize their tax liability to the greatest degree possible.
Beginning in February employees may see changes in their paycheck as a result of the withholding changes.
Do employers need to take any action?
In most cases, no, your payroll provider will update the tax tables within their systems. However, if the employer administers payroll in house, then they are responsible for making changes. The changes must be implemented by February 15th.
For HR One payroll clients, the changes have already been made in Payentry.
Do employees need to take any action?
The new withholding tables were designed to work with the existing W-4 form on file for employees. The W-4 is the form which employees provide to their employers, to determine the amount of federal income tax to withhold from the employees’ paychecks. The form helps employees adjust withholding based on their personal or financial circumstances, such as whether they have children or a spouse who is also working.
However, employees should review their withholdings for accuracy. For example, an employee who has gotten married since they last updated their W-4 withholding form may want to update it.
The IRS is going to be updating the W-4 form and withholding calculator for 2018.
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