The IRS has completed updating its online withholding calculator that individual taxpayers can use to determine how many withholding allowances they should claim for 2018. The IRS also issued a new 2018 Form W-4, Employee’s Withholding Allowance Certificate. The IRS had previously announced that taxpayers could use the old 2017 Form W-4, as modified in Notice 2018-14, until 30 days after the new form was issued.
The calculator and new Form W-4 are designed to implement changes made by P.L. 115-97, known as the Tax Cuts and Jobs Act, which increased the standard deduction, removed personal exemptions, increased the child tax credit, limited or discontinued certain deductions, and changed the tax rates and brackets, among many other changes.
To use the calculator, taxpayers should have certain information available, including an estimate of their 2018 income and other items that affect their taxes, including the number of children claimed for the child tax credit and the earned income tax credit. The IRS emphasized that the calculator is used to compute the amount of tax to be withheld in 2018, not for 2017. The Service also explained that using the calculator saves taxpayers from having to complete the worksheets that accompany Form W-4 and that the calculator does not ask taxpayers to enter any personal information to use it.
The IRS explained that certain taxpayers would be more likely to have a change in their tax situation necessitating filing a new Form W-4 with their employers, including two-income families, taxpayers with two or more jobs or who work only part of the year, taxpayers with children who will claim credits such as the child tax credit, and taxpayers who itemized deductions in 2017.
The IRS says it anticipates making further withholding changes in 2019. The Service also posted online FAQs regarding the withholding calculator.
— Sally P. Schreiber (Sally.Schreiber@aicpa-cima.com) is a Tax Adviser senior editor.