Federal Withholding Tables Updated
Last week, the IRS announced the federal withholding tables have been updated to reflect changes made by the tax reform bill signed into law on December 22, 2017. Employers must begin using the new withholding tables by February 15, 2018. Payroll On Time, Inc. updated its payroll system on Friday, January 12th and will be using the new federal withholding tables for all payrolls submitted on or after January 13th.
The new tables are designed to work with the current form W-4, so new forms do not need to be collected from employees at this time. The new tables reflect the increase in the standard deduction, the removal of personal exemptions, and the changes in tax rates and brackets as outlined by the new tax law.
The new tables will produce the correct amount of tax withholding for employees with simple tax situations. The IRS is redesigning the W-4 to reflect the more complex changes made by the new tax law, such as changes in available itemized deductions and the increase in the child tax credit. Employees with more complex tax situations are encouraged to use the IRS' revised tax withholding calculator to determine if they need to update their withholding. The revised calculator and new W-4 are expected to be released by the end of February.
The IRS anticipates further changes will be made in 2019 and will be working with businesses and the payroll community to enact those changes and encourage employees to submit a new W-4 for 2019.