On February 28, 2018, the IRS released the 2018 Form W-4 and an updated withholding calculator that employees can use to check their 2018 withholding.

Of importance, the 2018 Form W-4 continues to give employees the ability to claim personal allowances on line 5 although, effective in 2018 and through 2025, the deduction for personal allowances is suspended. The Form W-4 worksheet explains in detail how employees can confirm if their withholding will be adequate to cover their 2018 federal income tax liability.

In IR-2018-36 the IRS urges employees to use the updated withholding calculator to make sure they have the correct amount of federal income tax withheld from their pay in light of the many changes under the Tax Cuts and Jobs Act.

IR-2018-36 also includes frequently asked questions on the withholding calculator.

Next steps for employers

As previously explained, employees are not required to provide a new Form W-4 for 2018 unless they claimed exemption from federal income tax withholding in 2017 or they need to adjust their withholding for 2018 based on their review of the 2018 Form W-4 worksheet or withholding calculator. (EY Payroll Newsflash, Vol. 19, 053, 2-27-2018.)

Employees who used a 2017 Form W-4 because the 2018 Form W-4 was not available do not need to resubmit those changes again using the 2018 Form W-4.

Employees must begin using the 2018 Form W-4 effective 30 days after the release of the 2018 Form W-4, or Friday, March 30, 2018. (Notice 2018-14).

Employers are not required to provide notices to employees about their need to check their withholding; however, providing an employee communication that includes a link to the IRS 2018 withholding calculator could prevent misunderstandings should employees discover they are underwithheld when filing their 2018 federal income tax returns.

Of the 2,779 who responded to our February 20 webcast polling question, 56% indicated that they have, or plan to send a communication to employees reminding them to check their personal allowances on Form W-4.

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EY Payroll News Flash