Note: More information on the Withholding Calculator is available in the special Withholding Calculator Frequently Asked Questions.
Q: Why were changes made to the withholding tables in 2018?
A: New withholding tables are needed for 2018 to reflect the changes in tax rates and tax brackets, the increased standard deduction and the repeal of personal exemptions, among other things. These changes were included in the Tax Cuts and Jobs Act, signed in December 2017.
The IRS issued withholding guidance to help employers make changes to their payroll systems. The new withholding tables are designed to work with existing W-4s that employees have on file with their employers.
Q: How soon will people see a difference in their paychecks as a result of the change to tax rates?
A: Employees should have started seeing withholding changes in their checks around the end of February 2018. 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 they don’t have too little or too much withheld from their paychecks. To help with this, the IRS issued a new Withholding Calculator and updated Form W-4 to help employees check and update their withholding with their employer, if necessary.
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: Form W-4, Employee’s Withholding Allowance Certificate, 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 recommends employees check their withholding any time their personal or financial information changes.
The Form W-4 relates to an employee's federal tax withholding. State withholding is separate.
Q: Will employees need to fill out a new Form W-4 in 2018?
A: It depends. 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 on file with their employers to claim withholding allowances. The IRS revised the Form W-4 worksheets and the Withholding Calculator to reflect the new law more fully and provide employees information to determine whether they need to adjust their withholding. Employees should use the Withholding Calculator to check if they need to adjust their withholding. If they need to fill out a new Form W-4, they should do so and submit it to their employer as soon as possible.
Q: Did the IRS update the Form W-4 in 2018?
A: Yes. The IRS revised the Form W-4. The IRS also updated the Withholding Calculator on IRS.gov to help employees who wish to update their withholding in response to the new law or who start a new job or have other changes in their personal circumstances in 2018. In addition, the IRS updated Publication 15, Circular E, Employer’s Tax Guide, to help employers implement the changes.
Q: Should people check their withholding now that the updated 2018 Form W-4 and the Withholding Calculator are available?
A: Yes. Employees should check their withholding at the beginning of each year or when their personal circumstances change. It’s even more important this year for people to do a “paycheck checkup” following the changes in the new tax law. With the new tax law, it’s especially important for certain people to check their withholding. These include people who are two-income families, have previously itemized their deductions, have two or more jobs, work part of the year, have dependents, high incomes, complex tax returns, or had a large tax refund or large tax bill in 2017. Using the Withholding Calculator is the best way to check that you aren’t having too much or too little tax withheld from your paychecks.
Taxpayers can use the results from the Withholding Calculator to determine if they should complete a new Form W-4 and, if so, what information to put on a new Form W-4. Taxpayers who complete a new Form W-4 should submit it to their employer as soon as possible. If an employee needs to adjust their withholding, doing so as quickly as possible means there's more time for tax withholding to take place evenly during the rest of the year. But waiting until later in the year means there are fewer pay periods to make the tax changes - which could have a bigger impact on each paycheck.
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 itemized their deductions in the past, have two or more jobs in their household, or have dependents age 17 or over are especially encouraged to review their tax situations for under-withholding. The IRS encourages all employees to check their withholding. The IRS has updated the 2018 Form W-4 and the Withholding Calculator to help with this process.
Q: Are many people under-withheld on their taxes?
A: Most employees are over-withheld on their taxes, meaning that more taxes than they owe are withheld from their paychecks. More than seven in 10 taxpayers were over-withheld for tax year 2016, meaning they got refunds when they filed their tax returns in 2017. In particular, taxpayers who have children under age 17 may see their refunds increase as a result of the new tax law. These taxpayers might want to use the Withholding Calculator to learn how they can reduce their withholding and get more money in their paychecks throughout the year instead of at tax time next year.
Q: Will the IRS make further changes to Form W-4 in 2019?
A: In 2019, the IRS anticipates making further changes involving withholding. The IRS will work with businesses and the tax and payroll communities to explain and implement these additional changes.