The Tax Cuts and Jobs Act (TCJA) made significant changes to the manner in which individual income taxes are calculated. To accommodate and plan for the many changes included in the TCJA, taxpayers would be wise to consider their income tax withholdings on their salaries and wages to ensure that the amounts being withheld in 2018 are sufficient to meet their income tax liabilities under the new law. However, the problem that many taxpayers have encountered is that the Form W-4, Employee’s Withholding Certificate, is not yet fully-adjusted to the mandates of the new law.
The Internal Revenue Service has announced plans to modify the form to improve withholding accuracy in light of changes brought by the TCJA. However, after considering feedback from the payroll and income tax preparer communities, the IRS has decided to postpone its makeover of Form W-4 until the 2020 tax year. (Read IRS Statement on W-4)
A new draft version of the form for the 2019 tax year, which will be similar to the current 2018 version, will be available in the next several weeks. The Service is committed to a complete rework of the Form and will continue to work closely with outside industry commentators to make additional changes.
Note that the IRS strongly urges taxpayers to review their allowances as soon as possible to avoid having too little or too much withheld from their paychecks. A “withholding calculator” is available on the IRS website.
Grossman Yanak & Ford LLP concurs with that advice. In a year that will bring the most significant changes to the Internal Revenue Code in more than three decades, it is important that taxpayers take special care to avoid unplanned significant amounts due on April 15, 2019. We further advise employers to notify employees of the need to pay special attention to such matters in 2018.