2018 Withholding Tables Reflect Tax Reform Law

Author: Robert S. Teachout, XpertHR Legal Editor

UPDATE: At the end of February 2018, the IRS updated its Withholding Calculator and published a revised IRS Form W-4, Employee's Withholding Allowance Certificate for 2018 to reflect changes made by the tax reform law. Employees can use the calculator to help ensure that the proper amount of tax is withheld from wages based on the revised tax rates and brackets. They also can use it to determine whether to file a new Form W-4 with their employers.

January 16, 2018

The IRS issued the 2018 income tax withholding tables reflecting the changes made by the tax reform law enacted by President Donald Trump in December, 2017. The withholding tables reflect changes in the tax rates and brackets, the repeal of personal deductions and the increase in the standard deduction. Employers may begin incorporating the changes into their payroll systems while they wait for the IRS to issue IRS Publication 15, Circular E, Employer's Tax Guide, for 2018.

The IRS also issued Notice 1036 as the first in a series of steps to help improve the accuracy of withholding. In the Notice, the IRS instructs employers to begin using the 2018 tables as soon as possible, but not later than February 15, 2018, and to continue using the 2017 tables until they can implement the 2018 tables. This will enable many employees to begin seeing the effects of the changes reflected in their wage payments in February 2018.

The 2018 withholding tables are designed to work with the existing IRS Form W-4, Employee's Withholding Allowance Certificate, that employees already have on file with their employers. This will minimize the burden of employees having to file, and employers having to process, new Forms W-4 for 2018 withholding.

The IRS also announced that it will release a revised Form W-4 and update the withholding tax calculator that is on its website by the end of February. The new form and calculator will be used by new employees in 2018, and by current employees who want to update their withholding in response to the new tax law, or because of changes in their personal circumstances in 2018.

To help employers and employees understand the changes in the 2018 withholding tables, the IRS has published frequently asked questions on its website. The IRS said it will be making further changes regarding withholding for 2019, and that it will work with employers to encourage workers to file new Forms W-4 in 2019.