The Internal Revenue Service has released its Notice 1036, which updates income tax withholding tables for 2018 and reflects changes made by the tax legislation passed recently.
The updated withholding information has been posted on IRS.gov and shows new rates for employers to use this year. Employers should start utilizing the new tables as soon as possible – and no later than February 15. They should continue to use the 2017 tables until implementing the 2018 version.
The IRS says the time it will take for employees to see changes in their paychecks will vary depending on how quickly the new tables are implemented by their employers, and how often they are paid – weekly, biweekly or monthly.
Employees do not have to do anything at this time.
“The IRS appreciates the help from the payroll community working with us on these important changes,” said Acting IRS Commissioner David Kautter. “Payroll withholding can be complicated, and the needs of taxpayers vary based on their personal financial situation. In the weeks ahead, the IRS will be providing more information to help people understand and review these changes.”
Some of the changes in the new tax law include repealing personal exemptions, reductions in deductions and increasing the standard deduction, while modifying the tax rates and tax brackets.
The IRS is currently working on updating its withholding tax calculator on IRS.gov to better help taxpayers determine their withholding levels. The calculator, the IRS predicts, should be available by the end of February.
A new Form W-4 is in the works as well. This new W-4 will reflect the new law’s repeal of dependent exemptions and increases in the child tax credit and a new dependent credit.