Insights: Article

IRS Introduces Withholding Calculator & Form W-4

By   Angie Ziegler

March 12, 2018

The IRS recently released an updated withholding calculator and a new version of Form W-4. These items will help taxpayers check their 2018 withholding in lieu of the recently enacted tax reform legislation.

This matters to business owners, as these tools help ensure employees have the correct amount of tax withheld from their paychecks.

What is Form W-4?
Form W-4 is used by you (the employer) to ensure the correct amount of federal income tax is coming out of your employee’s paycheck. The form is filled out by your employees. Your employees need to fill out this form if they are new hires. They also need to fill out the form annually if they claim complete exemption from all federal income tax withholding.

While it’s not required, your employees can also submit a new Form W-4 at any time, especially if their personal or financial situation changes. Cue tax reform.

The newly enacted tax reform legislation has made some pretty significant changes related to employee withholding, including increasing the standard deduction, removing personal exemptions, raising the child tax credit and more. To learn more about the implications of this bill on individuals, check out this article

Tell me more.

This process began when the IRS released new withholding tables in January (see more about that here). These tables help you, as the employer, or your payroll provider, determine the amount of tax needed to be withheld from your employee’s paycheck.

Consider the withholding calculator and Form W-4 the next step in the process. The IRS is encouraging taxpayers to use these tools to ensure the right amount of tax is being taken out of their paychecks.

While the IRS is encouraging everyone to check their withholding, here are a few groups that are especially encouraged to take a look:

  • Two-income families
  • People with more than two jobs at the same time
  • Those who only work for part of the year
  • People with children who claim the Child Tax Credit
  • Those who itemized deductions in 2017
  • Individuals with higher incomes or more complex tax returns

The withholding calculator gives employees the information needed to complete a new Form W-4. Once your employees fill out this form, they need to submit it to you. As their employer, you will then need to take steps to ensure the correct amount of tax is being withheld.

Anything else I need to know?
These changes to withholding don’t affect 2017 tax returns. They are to be used to help prevent issues on 2018 tax returns.

Confused or have questions? Our payroll and tax reform professionals are here to help.

Latest Insights

July 19, 2018
Article
While it’s great to watch your team grow, hiring new employees can be a frustrating and grueling process.
July 19, 2018
Article
Often, human resources (HR) is over looked, but we’re here to tell you it’s an essential component of any organization and critically important to get right.
July 13, 2018
Article
Here are some idea for giving your new hire a smooth start into your business and alleviating stress for you.
July 13, 2018
Article
The impact of the recent SCOTUS Wayfair decision will continue to have a ripple effect on businesses and state sales tax compliance.
July 9, 2018
Article
The revenue cycle is a complex system and we have historically given much attention to the front-end and back-end while oftentimes leaving the middle functions of the cycle neglected.
July 3, 2018
Article
FASB Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, provides a 5-step framework for determining revenue recognition.
July 2, 2018
Article
As part of the Tax Reform Act of 1986, the “Kiddie tax,” a taxing regime designed to make the transfer of income items by wealthy parents to lower tax paying children less attractive, was implemented.
July 2, 2018
Article
When it comes to your employees, you likely conducted interviews on them when you first hired them.
July 2, 2018
Article
Nearly ten years after the release of the initial exposure draft, FASB issued ASU 2016-02, Leases - The standard may have been issued, but the conversation about this re-write of legacy guidance has not slowed.