Overview
IRS Releases Early Withholding Tables: The IRS published an early release copy of Notice 1036, the 2018 Percentage Method Tables for Income Tax Withholding, which provides guidance to employers on how much federal income tax to withhold from the W-2 wages of employees. The Notice provides that employers should implement the 2018 withholding tables as soon as possible, but not later than February 15, 2018, and should continue to use the 2017 withholding tables until they implement the 2018 withholding tables. Withholding rates in 2018 are affected by the 2017 tax reform legislation (Pub. L. No. 115-97).
The IRS also released a list of FAQs answering questions about the withholding tables that includes the following question and answer:
Q: Are some taxpayers at risk of being under-withheld on their taxes with the changes to the withholding tables?
A: Some people have more complicated tax situations and face the possibility of being under-withheld. For example, people who itemize their deductions, couples with multiple jobs or individuals with more than one job a year will be encouraged to review their tax situations. The IRS will be encouraging people—particularly those with more than one income in their household—to check their withholding. The IRS is updating the 2018 Form W-4 and the IRS.gov withholding calculator to help with this process.
On January 8, Sen. Ron Wyden (D-OR) and Rep. Richard Neal (D-MA), the Ranking Members of the Senate Finance Committee and House Ways and Means Committee, respectively, sent a letter to the Government Accountability Organization (GAO) requesting that the GAO review 2018 withholding tax tables to ensure that “there is no political influence in the formulation” of the tables. The letter expressed concern that the tables could cause taxpayers to under withhold taxes in 2018—and consequently find that they owe additional taxes in April 2019—as a result of the repeal of the personal and dependent exemptions and the repeal or limitation of many itemized deductions.