The IRS issued the 2018 W-4 form on February 28, 2018. Effective immediately, employers must implement the updated 2018 W-4 form for use by their employees in new hire kits or when employees request to make changes to their Federal withholdings.
There are a few changes to the form due to the new tax reform law enacted in December of 2017. Employees may want to review their current withholding elections and provide a revised W-4 form to ensure correct amounts are being withheld, especially if they have children or usually itemize their deductions. Two key changes that impact most tax payers are highlighted below:
Child Tax Credit:
There are two important changes to the child tax credit that impact taxpayers and should be reflected on the W-4 form. First, the child tax credit doubled from $1,000 to $2,000 under the new law, so employees may be allowed more withholding allowances due to this change and have less taken out of their paycheck. Second, the income threshold was increased from $110,000 to $400,000 for joint filers, so employees may now be eligible for the child tax credit when they weren’t before.
Standard Deductions/Itemized Deductions:
The standard deduction for single filers has increased from $6,350 to $12,000. For filers who are married filing jointly, it rose from $12,700 to $24,000. If employees itemize their deductions, they can usually claim more withholding allowances on their W-4, allowing their employer to withhold less. But with some of the changes under the new tax reform law, employees may see fewer itemized deductions or may now have to take the standard deduction since it has almost doubled. If this is the case, employees may need to lower their withholding allowances and have more taxes taken out of their paychecks.
As always employees should reach out to their tax advisor for assistance and guidance.
Do you have questions regarding the new W4 Form? Please contact our office to speak with one of our HR Business Partners today!
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