IRS Issues Early Withholding Tables to Take Into Account TCJA Changes

The IRS has issued Notice 1036, Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding.  These new tables take into account the changes made in P.L.115-97, better known as the Tax Cuts and Jobs Act (TCJA), which reduced individual income tax rates and made other changes.

As the IRS had indicated, the new tables continue to use withholding allowances in the computation of tax to be withheld, something often referred to as “exemptions” or “dependents” by many employees.  The amount has not actually just related to exemptions for years, so the fact that TCJA removed personal exemptions doesn’t mean that these allowances can no longer be used.

The publication contains 8 sets of tables based on the term of the payroll period, with each setting having both a “Single” and a “Married” component.

The guide also notes a change in rates for withholding on supplemental wages.  The general rate drops to 22% from its previous 25%, and the rate for supplemental wages in excess of $1 million for the year is decreased from 39.6% to 37% (the new top individual tax rate).

The IRS suggests that employers use these tables as soon as possible, but in any event no later than February 15.