What Does Tax Reform Mean for W-4s?
While ardent followers of tax reform have focused on such key issues such as pass-through entities, state and local deductions, AMT and foreign repatriation rates, there’s another looming issue—albeit less impactful on pocketbooks—that has not grabbed the headlines: W-4s.
Tax reform will eliminate taxpayer exemptions for individuals, spouses and their children. As such, many employees may want to submit new W-4s. However, the IRS emphasizes that new withholding tables 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.
The IRS recently released the withholding tables for tax year 2018 based upon the new individual tax rates under the Tax Cuts and Jobs Act. Employers should implement the 2018 withholding tables as soon as possible, but not later than February 15, 2018. Continue to use the 2017 withholding tables until these new tables are implemented.