On February 27, 2018, the IRS released the 2018 Form W-4, and it applies the same general approach to determining withholding allowances as in the past despite the elimination of personal exemptions under the new tax law. The updated form is four pages versus a two-page format in 2017. It retains the personal allowances worksheet and describes how employees may apply the credit for dependents in determining withholding allowances.
The 2018 Form W-4 references a withholding calculator, which was released by the IRS on February 28, 2018. The IRS is encouraging employees to use the withholding calculator to perform a quick “paycheck checkup” due to the recent changes in the 2018 tax laws. The calculator may help employees protect against having too little tax withheld and incur an unexpected tax bill in early 2019.
As an employer, you are not required to obtain an updated 2018 Form W-4, but with the changes in the laws, you may wish to encourage your employees to look at the 2018 Form W-4 and withholding calculator. An employee’s Form W-4 remains in effect until the employee gives you a new one. If you receive a Form W-4 that replaces an existing Form W-4, begin withholding in accordance with the new form no later than the start of the first payroll period ending on or after the 30th day from the date you receive the replacement Form W-4.
Follow the above links and determine if you need to update your withholdings. If changes to withholding are needed, fill out and submit a new Form W-4 and provide it to your employer. Please note the withholding calculator works for most taxpayers. However, if your individual tax situation is complex or you have many different revenue sources, we encourage you to consult your Lutz tax advisor.