With the onset of The Tax Cuts and Jobs Act we get many questions about how the tax changes effect your financial situation, AND the IRS gets plenty of questions as well, though they are slowly giving us the answers. (insert smiley here) Here are some recent questions they are asked (and answers) re the new withholding tables.
Q: Why are these changes being made?
A: The new withholding tables are needed to reflect the changes in tax rates and tax brackets, increased standard deduction and repeal of personal exemptions that were included in the new tax reform law signed in December. The withholding guidance issued today is for employers to make changes to their payroll systems and is designed to work with existing W-4s that employees have on file.
Q: How soon will people see the changes in their paychecks?
A: Employees should begin to see withholding changes in their checks in February. The exact timing depends on when their employer can make thew change and how often they are paid. It typically takes payroll providers and employers about a month to update withholding changes on their systems.
Q: Will employees need to take any action to get the new withholding rates?
A: No, Payroll changes required each year are made by employers and their payroll providers, so employees are not required to take any extra steps. However, employees should review their withholding to make sure that it is accurate. IRS will be releasing a new calculator and Form W-4 soon, to help ensure withholding is accurate.
Q: What is a withholding table?
A: A withholding table shows payroll service providers and employers how much tax to withhold from paychecks, given each employee’s wages, marital status, and the number of withholding allowances they claim.
Q: Will people need to fill out a new W-4 for right now?
A: No, the new withholding tables are designed to minimize taxpayer burden as much as possible and will work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances. The IRS is working on revising the Form W-4 to more fully reflect the new law and provide taxpayers information to determine whether they need to adjust their withholding.
If you have any questions on your withholding in relation to your tax return, let Bourke Accounting help you. Give us a call today at 502-451-8773 or come by for a visit. See you soon!