The Internal Revenue Service (IRS) has issued the 2018 version of its Form W-4, which reflects changes made by the Tax Cuts and Jobs Act (TCJA). Employees are not required to resubmit Form W-4 to their employer, but some will find it advisable to do so.
A revamp of the W-4 was necessitated by TCJA changes such as the elimination of personal exemptions and an increase in the child tax credit. Fortunately for employers, however, the changes in the 2018 version were not as significant as the IRS had been considering, according to Pete Isberg, vice president of government relations at ADP, LLC.
The new Form W-4, released February 28, still includes the allowance for one’s self, but the allowance for the taxpayer’s spouse now applies only if filing jointly, and dependent allowances are phased out depending on income. The IRS also issued a new online withholding calculator to help employees determine how many allowances they should be claiming.
Employers should consider issuing a notice to alert employees that they might want to update their withholding allowances in light of the TCJA, and directing them to the new W-4 and withholding calculator, Isberg said in a March 1 ADP webinar.
“Following the major changes in the tax law, the IRS encourages employees to check their paychecks to help ensure they’re having the right amount of tax withheld for their personal situation,” said Acting IRS Commissioner David Kautter in a statement. “Withholding issues can be complicated, and the calculator is designed to help employees make changes based on their personal financial situation.”
A Form W-4 remains in effect until the employee provides a new one. Revised withholding must begin no later than the first payroll period ending on or after the 30th day after the date the revised W-4 is received. The IRS previously updated its withholding tables to reflect the TCJA, and employers were required to begin using them no later than February 15.