IRS said that by the end of February it would have an online withholding calculator ready to help employees determine whether to adjust withholding as a result of the tax reform law.
The impact of the new tax reform law (Pub. L. No. 115-97) is meant to show up in paychecks no later than February 15, the IRS said when it issued new withholding tables for employers. The tables reflect the new law’s much higher standard deduction and adjusted tax rates, but they keep the personal-exemption-based withholding allowances set last year for 2018—even though the law eliminated personal exemptions.
As a result, employers are concerned there may be mismatches between the allowances employees have registered for 2018 and the withholding that will be suitable for them under the new system.
Peter Isberg, president of the National Payroll Reporting Consortium, said January 16 that Consortium members had not expected the IRS’s instruction that employers should rely on existing W-4 forms, where employees list personal exemptions. It was surprising, but at least it makes the initial process easier than requiring employees to file new W-4s, he said. Isberg said that, once the online withholding calculator is available, he expects the agency to issue a revised W-4 but not require employees to file new ones. Instead, he expects the IRS to “strongly encourage employees to review their status.”