Many Americans can look forward to seeing an increase in their paychecks next month due to the new tax law, but first employers must update withholding information for employees.
The IRS released recently the 2018 withholding tables – formally the 2018 Percentage Method Tables for Income Tax Withholding – and employers must begin using them no later than Feb. 15.
The new income tax withholding tables reflect the changes made by the Tax Cuts and Jobs Act passed and signed into law late last year by President Trump. The new tax law made major changes to the income tax rates, increased the standard deduction and did away with personal exemptions, effective for tax years beginning after Dec. 31, 2017. For more on the tax law and how you could be impacted, please read our comprehensive coverage here.
The new withholding tables have been posted to IRS.gov. By the end of February, the IRS is expected to have updated its withholding calculator as well. This will help employees determine whether they need to adjust their withholdings on revised Forms W-4, which will also be forthcoming.
The new withholding tables are designed to work with the Forms W-4 that employees already have filed. Therefore, employees do not have to do anything at this time.
The IRS likely will make further changes in 2019 to withholding, so employees should file new Forms W-4 next year.