After Congress and the current administration passed tax reform, the Internal Revenue Service (IRS) has recommended that employees review and revise the amount that is currently being withheld from their paychecks.
On February 28, 2018, the IRS suggests taking a look at current withholding amounts and accessing the IRS’s updated IRS Withholding Calculator to determine whether amounts withheld should be changed. If changes need to be made, taxpayers can find the appropriate form and submit it to the IRS.
Because the U.S. Tax Code changes on an annual basis, the IRS recommends all employees to do a paycheck checkup every year before filing. Taxpayers, such as those within a two-income household or families with children who claim the Child Tax Credit or additional deductions and credits are encouraged to review the amount they are withholding for the 2018 tax year as soon as possible. Any changes should be made by completing the new W-4 form.
According to recommendations made by the IRS regarding the new tax guidelines, employers were instructed to update their withholding tables by mid-February of this year. Many workers across the country have noted that their paychecks reflected these new withholding amounts. Employees were also not required to update their Form W-4 for 2018 solely due to the changes resulting from the 2017 tax bill according to the IRS.
HR professionals and PEO companies should be familiar with the new tax provisions and be prepared to guide employees through adjusting their withholding amounts if necessary to avoid having to pay a penalty in the 2018 tax season.