Updated Withholding Calculator Released Updated Withholding Calculator Released

Updated Withholding Calculator Released

The Internal Revenue Service ("IRS") has released the updated Withholding Calculator for use by taxpayers in estimating the appropriate withholding for federal income taxes in 2018. Following the December tax reforms under the Tax Cuts and Jobs Act and the January update to employer withholding tables, available here, it is particularly important that taxpayers reevaluate the amount withheld from their paychecks in order to avoid both significant overwithholding and significant underwithholding. The Withholding Calculator helps taxpayers estimate advisable adjustments for their Forms W-4 to address the recent changes to the tax code and withholding tables. (For retirement plans/systems, the 2018 Form W-4P has not yet been released, but plans/systems may rely on the 2017 Form W-4P until the 2018 form is released.) It reflects, among other things, changes to tax brackets, itemized deductions, child tax credits, and dependent credits, along with the repeal of dependent exemptions.
 
Although it is advisable for all taxpayers to reexamine the amounts withheld from their paychecks in 2018, the IRS has identified the following individuals in particular as potentially benefiting from such review:

  • Two-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.
The Withholding Calculator asks a taxpayer to estimate his or her income for 2018 and various tax credits and deductions to which the taxpayer might be entitled for the year. It returns the estimated federal income tax for the taxpayer for 2018 and provides specific recommendations on how to revise the Form W-4 in order to have an appropriate amount withheld from the taxpayer's paychecks.
 
The Withholding Calculator and instructions from the IRS for using the Withholding Calculator are available here.
 
For retirement plans and sponsors, additional information regarding required withholding is available in Publication 15-A, Employer's Supplemental Tax Guide (for use in 2018), pp. 24-25 and the 2017 Instructions for Forms 1099-R and 5498, pp. 12-13.
 
For more information about tax withholding in 2018, please contact Audra Ferguson-Allen, Robert Gauss, Chris Sears, Tara Sciscoe, Marc Sciscoe, Sarah Funke, Melissa Proffitt, or the Ice Miller LLP Employee Benefits attorney with whom you work.
 
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
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