The IRS issued Notice 1036 containing the much-anticipated 2018 percentage method tables for income tax withholding incorporating some of the changes contained in the Tax Cuts and Jobs Act of 2017 (TCJA). Employers are asked to implement the new withholding methods as soon as possible, but no later than February 15, 2018. Employers are instructed to use the 2017 withholding tables and methods until these tables are implemented. (The tables used for 2018 are included in the attached Alert.)

Personal allowances and Form W-4

Through 2017, employees could claim a personal allowance on Form W-4 for themselves, their spouse and dependents. Additionally, personal allowances could be claimed for other deductions, such as itemized deductions subject to the 2% floor. Further, some employees claimed as many as 99 allowances because they expected they would owe no federal income tax for the year.

Under the TCJA, and effective January 1, 2018 through December 31, 2025, the personal exemption deduction is suspended; however, the law provides that the IRS may administer the income tax withholding rules under Section 3402 without regard to this provision for tax years beginning before January 1, 2019. (TCJA Section 11041)

The IRS states in its Frequently Asked Questions (FAQs) that the 2018 income tax withholding tables just released are designed to work with employees' existing Forms W-4; therefore, there is no requirement at this time that all employees furnish a new Form W-4.

For more information on withholding, personal allowances and Form W-4, please see the attached Alert.

———————————————

———————————————
ATTACHMENT

EY Payroll News Flash