Ever since President Trump signed the Tax Cuts and Jobs Act (TCJA) into law last December, payroll professionals have been anticipating an updated IRS Form W-4. After issuing new federal income tax withholding guidance in January as a result of the TCJA, the IRS released the 2018 version of Form W-4, Employee’s Withholding Allowance Certificate, on Feb. 28.
The 2018 Form W-4 has been implemented in the Paycom system.
Interim guidance
The IRS previously released Notice 2018-14, which provided guidance on the usage of the existing 2017 version of Form W-4. Among other things, this notice:
- extended the effective period of the 2017 version for purposes of claiming exemption from withholding temporarily until Feb. 28, 2018
- described the procedures employees may claim exemption from withholding for 2018 using the 2017 Form W-4
- temporarily suspended the requirement that employees must furnish a new Form W-4 within 10 days of changes in status that reduce withholding allowances they are entitled to claim
- allowed employees (including newly hired employees) to use the 2017 Form W-4 to update their withholding allowances until 30 days after the 2018 Form W-4’s release (March 30)
- stated that employees who furnish new Form W-4s using the 2017 version do not need to furnish a 2018 Form W-4 after it is released
Changes to consider
Solely due to the changes passed in the TCJA, the IRS is not requiring employees to submit a 2018 Form W-4 to their employer, although they may if they choose. However, substantial changes have been made to the worksheets associated with the 2018 Form W-4, so employees should consider how the new rules will affect their specific tax and withholding situation when making the decision.
Despite the TCJA’s removal of personal exemptions from year-end income tax calculations, Form W-4 still includes a Personal Allowances Worksheet. Its credits section has been revised to allow for:
- the increased child tax credits as adjusted for income
- adjustments for credits claimed for other dependents
- a new line for “Other credits” that will be calculated by the employee using a worksheet found in the 2018 version of Publication 505 (yet to be released)
Additionally, the form’s Deductions and Adjustments Worksheet has been revised to adjust for the new values for standard deductions, as defined by the TCJA, while the Two-Earners/Multiple Jobs Worksheet contains updated wage brackets in the tables used to calculate allowances depending on multiple job households.
‘Paycheck checkup’
To help employees see the differences that completing a 2018 Form W-4 will affect their take-home pay, the IRS released an updated Withholding Calculator online.
The IRS encourages all employees use it to conduct “a quick ‘paycheck checkup’” and use the information it returns to determine if they would like to adjust their withholding. These values can be entered by the employee directly into Paycom’s Employee Self-Service tool to complete a new Form W-4.
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