As anticipated, the IRS has released the first of several steps to update withholding accuracy in light of the passage of the new tax legislation last month. On January 11, the IRS announced the release of updated withholding tables for employers to follow in Notice 1036.

The new withholding tables have been designed to reflect changes brought about by the new tax laws, including changes in rates and brackets, the increase in the standard deduction and the repeal of some personal exemptions. Furthermore, the tables are designed to help avoid under or over-withholding taxes when possible, and produce the correct withholding amounts for those with simple tax situations.

The IRS has requested that employers begin using the new rates listed as soon as possible and to continue using the 2017 tables until they have done so. However, employers are required to begin use of the new tables by February 15, 2018, at the latest. Once employers make those updates, many employees will begin to see an increase in their paychecks to reflect the new withholding rates. The new tables have been developed to operate seamlessly with the current W-4 withholding forms, which should create a simpler transition for employees and employers alike.

The IRS also intends to revise or update other items, including the withholding calculator on their website and the Form W-4. The new Form W-4 may take some time to revise, but it should reflect changes in itemized deductions and increases or repeals of some credits. Employers are asked to continue using the 2017 Form W-4 until the new form is released. Many taxpayers also use the IRS calculator to determine their own withholding, and the IRS anticipates the new calculator will be ready for public release by the end of February.

For taxpayers who have had personal life changes, workers starting new jobs in 2018 or for those who simply wish to update their withholding in light of the new tax laws, the overhauled calculator and Form W-4 can be used to make all withholding updates once they are released. The IRS intends on educating taxpayers about the new withholding measures, however, workers are encouraged to seek out more information regarding the changes on the IRS Withholding FAQ page.