With the new tax guidelines being pushed into effect, there is the possibility that the usage of outdated W-4 forms could create some confusion and potential mistakes. Employers have been instructed to follow the newly released guidelines to calculate how to much withhold in taxes from their employees’ paychecks starting mid-February. However, employers will be relying on data supplied via the old W-4 forms that correlated with the outdated tax code.
The new withholding tables, which are designed to work with the W-4 employers have on file, will go into effect Feb. 15th and employers will base the new withholding on these tables. Employers are simply required to switch to the new tables and will not change any individual withholding unless instructed to do so by the individual employees.
While the tax rates are going down, it is important for employees to check how their typical yearly deductions and exemptions will change as well. Because the new W-4 is not yet released it is imperative that employees take the initiative to “check their checks” and ensure that they are not having too much or too little withheld. This burden is on the individual employee and it is their responsibility to alert their employer if they need to change their withholding.
The easiest way for individuals to verify their new withholding (based on the new tax guidelines) will be to utilize the online calculator that the IRS will release next month. This calculator will calculate an individual’s estimated withholding based on their income level, family status, and other personal details. It will not however require the input of personal identity information. This step is particularly important for individuals who itemize their tax returns.
New W-4 forms are expected to be released later this year.
We have recently compiled a 2018 rates and limit document that individuals and employers can use as a reference point. Check it out here.
