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IRS publishes 2018 income tax withholding tables

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The U.S. tax reform legislation, also known as the Tax Cuts and Jobs Act, includes major changes to the previously existing tax system affecting both businesses as well as individuals. To implement this new tax reform legislation, the IRS is working to develop guidance and publishes statements once it becomes available. One of these statements is Notice 1036 with respect to the 2018 income tax withholding tables. 
 
The updated 2018 income tax withholding tables takes the following changes into account: the increased standard deduction, the repeal of personal exemptions and the modified income tax brackets and rates. As regards withholding on supplemental wages (e.g. bonuses), the withholding rate is 22% for employees receiving $1 million or less of supplemental wages during 2018 and provided those supplemental wages are identified separately from regular wages.

Employees will probably see an increase in their paychecks

Employers should apply the updated 2018 income tax withholding tables by February 15, 2018 at the latest and will probably result in a higher net income for most of the employees. 

Note that these updated withholding tables comply with the existing Forms W-4. The IRS is working on developing a revised Form W-4 and employees as well as employers should continue using the 2017 Form W-4 until the updated Form W-4 becomes available.

 

 

This article only includes general information and IMS is not, by means of this article, rendering any tax, legal or other professional services. This communication should not be relied upon for any decision or action that may have an impact on your business. Prior to taking any action, you should be in contact with your advisor.

 

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