Although new federal income tax tables and rates will take effect on January 1, there may be a delay in release of withholding tax guidance from the U.S Treasury Department for employers. In the meantime, the Internal Revenue Service (IRS) has explained that employers may use existing (2017) withholding tax tables and guidance until new guidance is released. According to a notice dated December 3, 2017, the IRS “anticipates issuing the initial withholding guidance (Notice 1036) in January reflecting the new legislation, which would allow taxpayers to begin seeing the benefits closely with the nation’s payroll and tax professional community during this process.”
The Act authorizes the Treasury Department to permit employers to apply existing wage withholding to rules and calculations throughout 2018, although this seems unlikely. According to H.R. 1 and the conference report:
“…the Secretary (of the Treasury) may administer the withholding rules under Section 3402 for taxable years beginning before January 1, 2019, without regard to the amendments made under this provision. Thus, at the Secretary’s discretion, wage withholding rules may remain the same as under present law for 2018.”
However, to avoid adversely affecting taxpayers, Treasury is likely to issue guidance as soon as possible, to align employer wage withholding calculations with the new income tax rates which will take effect on January 1, 2018.
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