The Tax Cuts and Jobs Act new tax law was enacted in December 2017, with an effective date of January 1, 2018. Due to the last minute rush to implement provisions of the new federal tax law, IRS tables and W-4 Forms for 2018 are not consistent with changes in the tax law — thus, it is more important than ever that employees closely monitor their 2018 federal income tax withholdings to avoid potentially large tax obligations due when their 2018 Form 1040 is filed by April 15, 2019.
2018 IRS TAX WITHHOLDING TABLES
IRS ONLINE WITHHOLDING CALCULATOR
- Check their withholdings with the IRS online calculator once it is posted on the IRS website by late February;
- Complete a 2018 W-4 Form once the IRS completes their revision of the current W-4 Form; and
- Determine the ratio of year 2018 federal income tax withholdings to taxable wages from your 2018 check stub. Compare that “ratio” of tax to gross wages (excluding pre-tax retirement plan and health insurance employee deductions) to the “rates” on your 2016 and 2017 Form 1040s (Form 1040, page 2, line 63, “total tax” divided by Form 1040, page 1, line 7, “wages”). Is your 2018 “ratio” similar to your 2016 and 2017 Form 1040 ratios?