On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act of 2017 bringing with it a slew of changes to the corporate and personal tax code.
One of the impacts of the new law is the reduction in payroll tax withholding rates for 2018. The IRS is currently working to develop withholding guidance to implement the tax reform bill. The IRS emphasizes this information will be designed to work with the existing Forms W-4 that employees have already filed, and no further action by taxpayers is needed at this time.
When will your employees see a reduction in their payroll withholding?
February, or sometime shortly thereafter. The IRS is currently developing initial withholding guidance which will come out in the form of Notice 1036 slated to be published sometime in January ’18.
Keep in mind that depending on the final IRS guidelines, your employees may need to complete and return to you a new W-4 form. Current W-4 form asks employees if they were married and about the number of children in their family. The new tax bill eliminates those exemptions, so the old W-4 will likely be invalid.
The law changes the tax rates and the brackets of taxable income to which the rates apply (see below). It also increased the standard deduction for individuals who do not itemize deductions, suspended the deduction for personal exemptions and increased the child/family tax credit. The new tax rates and tax payer brackets are as follows:
| 2018 Tax Rate | Single | Married Filing Jointly |
| 10% | $0 to $9,525 | $0 to $19,050 |
| 12% | $9,525 to $38,700 | $19,050 to $77,400 |
| 22% | $38,700 to $82,500 | $77,400 to $165,000 |
| 24% | $82,500 to $157,500 | $165,000 to $315,000 |
| 32% | $157,500 to $200,000 | $315,000 to $400,000 |
| 35% | $200,000 to $500,000 | $400,000 to $600,000 |
| 37% | Over $500,000 | Over $600,000 |
versus
| 2017 Tax Rate | Single | Married Filing Jointly |
| 10% | $0 to $9,325 | $0 to $18,650 |
| 15% | $9,325 to $37,950 | $18,650 to $75,900 |
| 25% | $37,950 to $91,900 | $75,900 to $153,100 |
| 28% | $91,900 to $191,650 | $153,100 to $233,350 |
| 33% | $191,650 to $416,700 | $233,350 to $416,700 |
| 35% | $416,700 to $418,400 | $416,700 to $470,700 |
| 39.6% | Over $418,400 | Over $470,700 |
Stay tuned to our blog here, or register for our newsletter- and we will keep you informed once final IRS guidelines have been issued.
Have a Happy and Prosperous 2018 everyone!