IRS Statement – Withholding for 2018

[Elrod]

December 26, 2017

The IRS is working to develop withholding guidance to implement the tax reform bill signed into law on December 22.  We anticipate issuing the initial withholding guidance in January, and employers and payroll service providers will be encouraged to implement the changes in February. The IRS emphasizes this information will be designed to work with the existing Forms W-4 that employees have already filed, and no further action by taxpayers is needed at this time. 
 
Use of the new 2018 withholding guidelines will allow taxpayers to begin seeing the changes in their paychecks as early as February.  In the meantime, employers and payroll service providers should continue to use the existing 2017 withholding tables and systems.

Dec. 13, 2017

The IRS is continuing to closely monitor the pending legislation in Congress, and we are taking the initial steps to prepare guidance on withholding for 2018. ‎We anticipate issuing the initial withholding guidance (Notice 1036) in January reflecting the new legislation, which would allow taxpayers to begin seeing the benefits of the change as early as February. The IRS will be working closely with the nation's payroll and tax professional community during this process.

https://www.irs.gov/newsroom/irs-statement-withholding-for-2018

[ILLMAS]

Even though this will be covered heavily on the news, it will be a good idea to start notifying payroll clients about the upcoming change in general so they can let their employees know.  Our state changed its withholding rate mid-year this year and a couple of clients called that I had made a mistake on the employees payroll.

[Medlin Software, Dennis]

My prediction of almost instant notice 1036 failed...  My guess is reworking to not need a new W4 is the delay.

ANYTHING which makes an employee net pay less than expected will cause push back to the employer.  Since the "news" keeps mentioning how employees will see more net pay, suggestions to employers such as posting a copy of the IRS notice may save the employer some time, as well as lost productivity.  Personally, I would only post the IRS statements, verbatim, with no comments added by the employer (which is what I am suggesting to my customers).  Also check for statements from the state, in case the state (such as ND) is tied to FWH calculations.

[Lee B]

In my state of Oregon, state Income Tax Withholding is not tied to Federal Withholding but the state does piggyback on the Federal W-4

i.e., Oregon does not have a State W-4. Therefore when a employee wants to change their WH status, they will have to fill out a a (Federal Only) 2018 W-4

and a (State Only) 2017 W-4.   Are we having fun yet ?  Isn't Tax Simplification Wonderful ? 

[Medlin Software, Dennis]

There are other states with no separate W4, or allow the federal W$ to work for both.  Could be part of the reason the IRS decided to create calculations not requiring a W4 change.  For many years, we have suggested having a separate W4 type form for federal and state, even if not required.  Much easier for the employer in the long run.

There are states which allow a deduction for federal tax withheld.  It will be interesting to see if any change their calculations, or just take the windfall.

[Abby Normal]

On 12/27/2017 at 3:19 PM, cbslee said:

 Are we having fun yet ?  Isn't Tax Simplification Wonderful ? 

Have you noticed they haven't used the word 'simplification' for awhile now?

[Medlin Software, Dennis]

Maybe the handlers (do the handlers change, or is the same small group really in control of politics?  Maybe I do not really want to know...) of those we elect are wising up too, and trying a new sales pitch...  It would be fun if they had to drink what they sell (think VitaMeataVegamin).

[Lee B]

1 hour ago, Abby Normal said:

Have you noticed they haven't used the word 'simplification' for awhile now?

Actually, the House of Representatives held a "Tax Simplification " news conference several weeks ago, where they waved around the proverbial postcard tax return.

However I did notice it was an extra large sized postcard.