The IRS issued a notice on Monday, January 29, 2018, to provide more guidance on the withholding rules that resulted from the recent legislation known as the Tax Cuts and Jobs Act. As part of that new legislation, the IRS issued new withholding tables with a promise of a new Form W-4. The IRS has been in the process of revising Form W-4, but now feel that the new version may not be finished until after February 15, 2018.
Employees, who are exempt from withholding because they did not have tax liability for the previous year and do not expect a tax liability for the current year, are generally required to file Form W-4 to claim the exemption. The forms are usually effective for the current tax year until February 15 of the following year. The notice explains the rules for taxpayers who wish to claim the exemption for 2018, which include an extension of the effective date of the 2017 Form W-4 until Feb. 28, 2018, and allowing taxpayers to use the 2017 W-4 form (modified as instructed in the notice) until 30 days after a 2018 version of Form W-4 is issued by the IRS.
The notice in general covers these points:
- Extends the use of existing 2017 Form W-4 to claim exemption from withholding for 2018 until the IRS can issue a new 2018 Form W-4
- Temporarily suspends the rule that employees must notify their employers of changes in status that affect their withholding with ten days
- Provides the new rate of optional withholding on supplemental wages
- Provides that withholding on periodic payments (such as annuities) when no withholding certificate is in effect is based on treating the payee as married and claiming three withholding allowances.
If you need further guidance, please contact Loggins Kern & McCombs.