The IRS has issued an
updated Form W-4 and revised the online withholding calculator for the new tax
law. Employees need not complete a new W-4, but many should use the calculator
to see if they need to hand in a new one.
The early February withholding tables do not reflect all the
changes in the new law, such as the result of trade-offs between lower rates
and the loss of some deductions and tax breaks which, for some employees, could
result in substantially too little FIT being withheld for 2018. For example, a
taxpayer whose taxes might be, say $500 lower in 2018 because of the new tax
law, might have FITW that is $5,000 lower because of the new IRS withholding
tables. If she does not change her withholding, her withheld FIT will be $4,500
short for 2018.
Other employees may have too much withheld. Those who should
definitely use the calculator or at least re-estimate their 2018 taxes are
two-income families; individuals who hold more than one job; those with
children, especially if they claim the child tax credit; those who have always
itemized; high-income taxpayers, including business owners and those with
substantial outside income; and those with complex tax returns.
[Tax Notes
Today; The Wall Street Journal via AIPB General Ledger, April 2018 issue]
