At last! 2018 Form W-4 and withholding calculator
Both reflect changes made by the Tax Cuts and Jobs Act, the tax reform legislation that took effect Jan. 1.
Meet the new W-4
The new form looks a lot like the old form. But the whole package has doubled in size—from two pages to four pages—thanks mainly to expanded instructions for employees. The personal allowances worksheet moves to page three and is more complicated because of the doubling of the standard deduction, the suspension of personal exemptions and changes to dependent tax credits.
Especially for you: The IRS has renamed Box 9 to First date of employment, so you can use the form to report new hires to the state directory.
Now that the IRS has released the 2018 form, it’s a good idea to distribute new forms to everyone. The expanded instructions should answer most of employees’ questions, so they won’t have to ask you (they shouldn’t be asking you, anyway).
You should encourage employees flip to page three and complete the personal allowances worksheet. Although the worksheet references Pubs. 972 and 505, those pubs have been revised for 2017 Form 1040 purposes; they probably won’t help employees very much right now. The IRS says that updated pubs should be out shortly.
Under previous issued interim guidance, employees who experienced a change in family status had until 30 days after the IRS released the 2018 W-4 to refile with to you claim fewer allowances. These employees must refile with you by the end of March. New hires must also begin using the 2018 form at the end of the month.
The IRS says that the withholding calculator is more accurate than the worksheets that accompany the W-4 and that those who use the calculator don’t need to also complete the worksheets. Among the employees who should use the calculator are:
- Two-income families
- Employees with multiple jobs or those who work for only part of the year
- Employees with children who claim credits such as the child tax credit
- Employees who itemized deductions in 2017
- Employees with high incomes and more complex tax returns.
The calculator asks employees to estimate their 2018 income and other items that affect their taxes, including the number of children claimed for the child tax credit, earned income tax credit and other items. Employees should gather their most recent pay stubs and have copies of their 2017 1040s handy.
If employees’ circumstances change during the year, the IRS advises that they revisit the calculator so they can adjust their withholding.
Scam savvy: The calculator neither requests personally-identifiable information from employees nor saves the information they enter. Warn employees to watch out for email or phone scams where phishers impersonate the IRS. Tell employees that the IRS doesn’t send emails related to the calculator or the information they entered.
The IRS has also released FAQs on the withholding calculator.
More to come
The IRS has indicated that more withholding changes will be made for 2019. Stay tuned.