And you thought you had to work through the holiday break? With tax reform now on the books, the Internal Revenue Service (IRS) has more than a few changes to make to ensure that 2018 starts off right. That means, among other things, new withholding tables to accompany those new tax rates.
As employers and employees scramble to understand how that might affect paychecks in early 2018, the IRS has released the following statement:
The IRS is working to develop withholding guidance to implement the tax reform bill passed by Congress on December 20. 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.
Throughout this process, the IRS will continue working closely with the payroll and tax communities on these changes.
In other words, your January 2018 paychecks should look largely the same as your December 2017 paychecks (assuming no big non-tax related moves). Changes should begin to kick in around February of 2018 but we’re all (including IRS, tax pros, and employers) working through the details together, so be patient.
Once the IRS guidance is released to correspond to the new tax rates, you may need to change your form W-4. And you know how some employers ask you to complete a new form W-4 at the beginning of each year? Your employer may wait a few weeks this year before asking you to fill that out. You may also, on your own, want to fill out a new form W-4 if you got married, had kids, landed a promotion or picked up a second job. But again, be patient in case the form changes. I’ll be updating my form W-4 guide (you can find it here) as soon as more information is available.