NEWS

New Tax Withholding Tables Must Be Implemented by February 15, 2018

The new Tax Cuts and Jobs Act signed into law on December 22, 2017, includes an increased standard deduction, repeal of personal exemptions and changes in tax rates and income brackets. As a result, employers are required to implement new tax withholding rates on or before February 15, 2018.

On January 11, 2018, the IRS issued initial withholding guidance and new tax withholding tables, which incorporate the Act’s tax changes and recommend the appropriate amount of money to withhold from employees’ paychecks for federal taxes. The new tables work in conjunction with the existing Form W-4s you have on file for your employees; therefore, employees do not need to file new W-4s or take any further action at this time.

The IRS has indicated it is working on and will be releasing a new Form W-4 soon, which will more fully reflect the Act’s changes and provide taxpayers with necessary information to determine whether they need to adjust their tax withholding. The IRS also intends to release a new withholding tax calculator by the end of February 2018, for employees to calculate accurate and appropriate withholdings. More withholding changes are anticipated for 2019, including encouraging workers to file new W-4s. Thus, it is likely that employers will need to process a large volume of Form W-4 changes for 2019. For more information regarding the tax and withholding changes, please review the Frequently Asked Questions issued by the IRS. 

Compass suggests employers consult with your compensation and payroll departments and any third-party payroll vendors to confirm these changes will be properly and timely implemented. If your company handles payroll in-house, these changes may require payroll software updates. We also suggest you notify employees they may see a difference in their withholding before their first paycheck reflects the changes. Compass will continue to monitor and inform you regarding additional updates and as always, feel free to reach out to your Solutions Provider with questions.

 

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