As holiday seasons go, this one may not be all that bright for. As this issue of Legal Alert went to the printer, Congress was wrestling with changes to the tax rates and brackets for 2018 as part of its tax reform effort, which may force the IRS to delay issuing the 2018 withholding tables. Ho, ho, ho, indeed. (Rev. Proc. 2017-58, IRB 2017-45; Notice 2017-64, IRB 2017-45)
Projected withholding allowance amounts. The personal exemption amount, which doubles as the value of one withholding allowance for an annual pay period, would increase to $4,150 for 2018, up from $4,050 for 2017. The estimated value of one allowance per pay period in 2018 is:
- Weekly: $79.81
- Biweekly: $159.62
- Semimonthly: $172.92
- Monthly: $345.83
- Quarterly: $1,037.50
- Semiannual: $2,075.00
- Annual: $4,150.00.
DON’T TOUCH THAT DIAL: The IRS publishes the official withholding allowance amounts in Notice 1036, along with the percentage method withholding tables. For all the news and Notice 1036, refer to www.payrolllegalalert.com/2018_inflation_adjustments.
Potential tax reform wrinkles. Congress made no changes to the amount employees can defer into their 401(k) accounts. Next year, employees can defer $18,500 on a pretax basis. The overall amount they can defer, including pretax, after-tax and employer contributions, is the lesser of 100% of their compensation or $55,000.
The same, however, isn’t true for qualified transportation. Under the IRS’ inflation adjustments, the monthly tax-free reimbursement for qualified employer-provided parking and pretax mass transit benefits increases $5, to $260. But this appears to meet the axe in the House and Senate tax reform bills.
PLUG IN: Nothing is set in stone until tax legislation passes both houses of Congress and the president signs it. For up-to-the-minute information on tax reform, go to our blog, Payroll Today, at businessmanagementdaily.com/payroll-today.
Editor’s Note: Congress has passed the first major overhaul of the U.S. tax code in more than 30 years. The law, colloquially known as the Tax Cuts and Jobs Act, will have a far-reaching impact on both employers and employees. Specifically, employers confront an altered landscape when it comes to certain fringe benefits and pay policies. And, you will have to adjust yourvery quickly to accommodate these changes, as no transition relief has been provided.
Fortunately, we’ve put together a 15-page Free Special Report, authored by Alice Gilman, editor of Payroll Legal Alert, which offers a detailed breakdown of the new tax law’s impact on U.S. employers, and more specifically, payroll and HR departments. Download it FREE.