The new 2018 W-4 form for reporting employee payroll withholding information, officially the Employee’s Withholding Allowance Certificate, was released by the IRS the end of March. Up until its release, the IRS allowed taxpayers to use the old 2017 Form W-4, with the recommendation that they update the old form to allow for changes implemented by the Tax Cuts and Jobs Act signed into law in December 2017.
What is the 2018 W-4 form?
Simply speaking, it’s the form an employee fills out when beginning a new job so the employer will know how much to deduct from each paycheck for federal taxes. Due to the tax law changes, the IRS has requested that all 2017 W-4 forms be replaced with the new 2018 W-4 form. The IRS has provided a Withholding Calculator to make sure you have the right amount of tax withheld from your paycheck.
Completing the new 2018 W-4
You will be asked to estimate values of your 2018 income, the number of children you will claim for the Child Tax Credit and Earned Income Tax Credit, and other items that will affect your 2018 taxes (which will be filed in 2019). Here are some tips from the IRS:
- Gather your most recent pay stubs.
- Have your most recent income tax return handy; a copy of your completed Form 1040 will help you estimate your 2018 income and other characteristics and speed the process.
- Keep in mind that the Calculator’s results will only be as accurate as the information you provide. If your circumstances change during the year, come back to this Calculator to make sure that your withholding is still correct.
- The Withholding Calculator does not ask you to provide sensitive personally-identifiable information like your name, Social Security number, address or bank account numbers. The IRS does not save or record the information you enter on the Calculator.
Make sure the Withholding Calculator is right for you
If your tax situation is more complex, the Withholding Calculator won’t give you the answers you need. Complex issues could include taxpayers who owe self-employment tax, alternative minimum tax, the tax on unearned income of dependents or certain other taxes, and people with long-term capital gains or qualified dividends. Some help can be expected in early spring with the updated Publication 505, Tax Withholding and Estimated Tax. Most taxpayers who have complex or ongoing issues will continue to plan closely with their CPA tax professional for ongoing tax management.
How to Change Your Withholding
- Use your results from this Calculator to help you complete a new Form W-4, Employee’s Withholding Allowance Certificate, and
- Submit the completed Form to your employer as soon as possible. Withholding takes place throughout the year, so it’s better to take this step as soon as possible.
Anything else about the new 2018 W-4?
You bet! This Special Note for 2019 is also from the IRS: “If you follow the recommendations at the end of this Calculator and change your withholding for 2018, the IRS reminds you to be sure to recheck your withholding at the start of 2019. This is especially important if you reduce your withholding sometime during 2018. A mid-year withholding change in 2018 may have a different full-year impact in 2019. So if you do not file a new Form W-4 for 2019, your withholding might be higher or lower than you intend. To help protect against having too little withheld in 2019, we encourage checking your withholding again early in 2019.”
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