IRS has released the 2018 version of Publication 15, (Circular E), Employer’s Tax Guide, updated to reflect a number of important changes made by the Tax Cuts and Jobs Act (TCJA; P.L. 115-97), signed into law just over one month ago. This article highlights what’s new in the Publication.
Background. IRS Publication 15 provides guidance on the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. The publication also includes information on the forms that employers must give to employees and that employees must give to employers, as well as the forms that must be sent to IRS and the Social Security Administration (SSA).
Changes to 2018 version. The 2018 version of Publication 15 takes into account a number of important changes affecting employers, including a number of changes made by the TCJA.
… Withholding tables. The 2018 wage bracket withholding tables and the previously-released percentage method withholding tables are included in Publication 15. The 2018 withholding tax tables incorporate changes to the individual tax rates made by the TCJA. Employers should implement the 2018 withholding tables as soon as possible, but no later than Feb. 15, 2018. The 2017 withholding tables should continue to be used until the 2018 withholding tables are implemented.
… Form W-4 exemption. The new version of Publication 15 also takes into account recent guidance (see ¶ 8) on employees claiming exemption from federal tax withholding on Form W-4. The Pub provides that a new Form W-4 must be provided to the employer by Feb. 28, 2018; it also notes that, because the 2018 version of Form W-4 may not be available by that date, employees can use a 2017 Form W-4 and follow instructions for how to modify it for limited 2018 use.
… Increased withholding allowance. The value of an annual withholding allowance has increased from $4,050 to $4,150.
… Lower supplemental wage withholding rate. The TCJA lowered the withholding rates on supplemental wages to 22%.
… Lower backup withholding rate. The TCJA lowered the backup withholding rate to 24%.
… Moving expense reimbursement exclusion generally suspended. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, exclusion for qualified moving expense reimbursements is suspended, except in the case of a member of the U.S. Armed Forces on active duty who moves because of a permanent change of station.
… Social security wage base. The social security wage base limit for 2018 is $128,400.
… Disaster tax relief. The 2018 version of Publication 15 reminds employers that disaster tax relief was enacted for those impacted by Hurricane Harvey, Irma, or Maria, and that IRS has provided special relief designed to support employer leave-based donation programs to aid the victims of these hurricanes and to aid the victims of the California wildfires that began Oct. 8, 2017.
References: For withholding by employers, see FTC 2d/FIN ¶ H-4220 et seq.; United States Tax Reporter ¶ 34,024. 2018 Publication 15.