IRS has released an updated withholding calculator on its website, as well as a new version of Form W-4, to help taxpayers check their 2018 withholding in light of changes made by the Tax Cuts and Jobs Act. IRS also issued a series of frequently asked questions (FAQs) on the withholding calculator.

Background. The TCJA made major tax law changes for individuals. Among other changes, it increased the standard deduction, removed personal exemptions, increased the child tax credit, limited or discontinued certain deductions, and changed the tax rates and brackets, effective for tax years beginning after December 31, 2017 and before January 1, 2026.

On January 11, 2018, IRS issued 2018 withholding tables that reflect the TCJA. Employers were instructed to begin using the 2018 withholding tables as soon as possible, but not later than February 15, 2018.

The updated withholding tables are designed to work with existing W-4s that employers have on file, but many taxpayers (such as those with children or multiple jobs, and those who itemized deductions under prior law) are affected by the new law in ways that can’t be accounted for in the new withholding tables.

New withholding calculator released. On February 28, IRS released an updated withholding calculator on its website, as well as a new version of Form W-4, to help taxpayers make sure that their withholding is appropriate.

IRS encourages employees to use the withholding calculator and new form to perform a quick “paycheck checkup” to help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time in 2019. It can also prevent employees from having too much tax withheld.

IRS specifically encouraged taxpayers with “more complicated financial situations” to check their withholding, including:


  • 2-income families.
  • People with two or more jobs at the same time or who only work for part of the year.
  • People with children who claim credits such as the Child Tax Credit.
  • People who itemized deductions in 2017.
  • People with high incomes and more complex tax returns.

IRS noted that those with particularly complex situations (e.g., those who owe self-employment tax or alternative minimum tax) might need to consult Publication 505, Tax Withholding and Estimated Tax, to determine whether their withholding is proper. IRS expects Publication 505 to be available on its website in early spring.

FAQ guidance. IRS provided further information on the withholding calculator in a set of contemporaneously issued FAQs, which provided guidance on issues including how employees change the amount of tax withheld from their paychecks and why it’s especially important for taxpayers to check their withholding this year.

The FAQs also noted that IRS anticipates making further changes involving withholding in 2019, and that it would work with businesses and the tax and payroll communities to explain and implement these additional changes.

For more information, click the links below.

Updated Withholding Calculator News Release  (IRS website, Feb. 28, 2018)

IRS Withholding Calculator (IRS website, Feb. 28, 2018)

Source:  Thomson Reuters Checkpoint Newsstand 3/1/18