Q: Why are these
changes being made?
A: The new withholding tables
are needed to reflect the changes in tax rates and tax brackets, increased
standard deduction and repeal of personal exemptions that were included in the
new tax reform law signed in December. The withholding guidance issued today is
for employers to make changes to their payroll systems and is designed to work
with existing W-4s that employees have on file.
Q: How soon will
people see the changes in their paychecks?
A: Employees should begin to
see withholding changes in their checks in February. The exact timing depends
on when their employer can make the change and how often they are paid. It
typically takes payroll providers and employers about a month to update
withholding changes on their systems.
Q: Will employees
need to take any action to get the new withholding rates?
A: No. Payroll changes required
each year are made by employers and their payroll providers, so employees are
not required to take any extra steps. However, employees should review their
withholding to make sure that it is accurate. IRS will be releasing a new
calculator and Form W-4 soon, to help employees ensure withholding is accurate.
Q: What is a
withholding table?
A: A withholding table shows
payroll service providers and employers how much tax to withhold from employee
paychecks, given each employee’s wages, marital status, and the number of
withholding allowances they claim.
Q: What is a Form
W-4?
A: This is an IRS form that
employees provide to their employers, to determine the amount of federal income
tax to withhold from the employees’ paychecks. The form helps employees adjust
withholding based on their personal circumstances, such as whether they have
children or a spouse who is also working. The IRS always recommends employees
check their withholding any time their personal or financial information
changes.
Q: Will people need
to fill out a new W-4 form right now?
A: No, the new withholding
tables are designed to minimize taxpayer burden as much as possible and will
work with the Forms W-4 that workers have already filed with their employers to
claim withholding allowances. The IRS is working on revising the Form W-4 to
more fully reflect the new law and provide taxpayers information to determine
whether they need to adjust their withholding.
Q: Is the IRS
working on a new Form W-4 to reflect the new tax law?
A: Yes. The IRS continues to
work on more detailed withholding information, which will be available soon in
Publication 15 and related publications. In addition, the IRS is working on
revising the Form W-4 to more fully reflect the new law and providing taxpayers
information to determine whether they need to adjust their withholding. The IRS
is also revising the withholding tax calculator on IRS.gov to help employees
who wish to update their withholding in response to the new law or other
changes in their personal circumstances in 2018. The IRS anticipates this
calculator should be available by the end of February.
Q: Should people
check their withholding after the new 2018 Form W-4 and the withholding
calculator are available?
A: Yes. It’s always a good idea
for people to check their withholding status. The IRS encourages all taxpayers
to check their withholding when the new information is available in February.
The IRS will help educate taxpayers about the new withholding guidelines and
the calculator. The effort will be designed to help workers ensure that they
are not having too much or too little tax taken out of their pay.
Q: Are some
taxpayers at risk of being under-withheld on their taxes with the changes to
the withholding tables?
A: Some people have more
complicated tax situations and face the possibility of being under-withheld.
For example, people who itemize their deductions, couples with multiple jobs or
individuals with more than one job a year will be encouraged to review their
tax situations. The IRS will be encouraging people – particularly those with
more than one income in their household—to check their withholding. The IRS is
updating the 2018 Form W-4 and the IRS.gov withholding calculator to help with
this process.
Q: Are many people
under-withheld on their taxes?
A: Most people are over-withheld
on their taxes, meaning that more taxes are held out of their paychecks than
what they owe.
Q: Will the IRS be
making further changes to Form W-4 in 2019?
A: In 2019, the IRS anticipates
making further changes involving withholding. The IRS will work with the
business and payroll community to encourage workers to file new Forms W-4 next
year and share information on changes in the new tax law that impact
withholding.
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