February 2018 Income Tax Withholding Table

The income tax changes described in the 2018 State of the Union as the “biggest tax cuts and reform in American history” are taking effect now. In fact, companies had until February 15, 2018, to make sure they have updated their tax withholding tables. Here are a few other considerations for educating your company and team on being compliant with the IRS’ Notice 1036.

 Payroll Confirmation

Employers were encouraged to move to the new withholding tables as soon as possible in 2018 but were given a hard deadline of February 15, 2018. It’s up to you to make sure that your payroll company has made the necessary update.

They may already have implemented the new tables, but it is good practice for you to get written confirmation of the update from payroll.

 Educate Employees

Your payroll staff and managers are probably busy enough already so inform employees to expect the change. Ideally, you’ll do so before the first paychecks go out reflecting the new withholdings. After all, some of your employees could see an increase per pay period, but others may see a decline. The percentage method used in determining the withholding varies depending on:

  • Type of payroll period (weekly, biweekly, semimonthly, monthly, quarterly, etc.)
  • Marital status
  • Residency status
  • Individual benefits and deductions

Give Team Leads A Heads Up

Managers, Human Resources, and Payroll teams could all be called upon to help employees understand the implications of the changes. Help them out with an explanatory email outlining the basics, and directing them to suggest the IRS’s website as a helpful resource. You may want to take this opportunity as well to remind your leadership to avoid offering tax advice and instead encourage employees to reach out to a tax adviser.

Encourage Financial Planning

While the changes are designed not to require individual employees to have to do anything new, you might take advantage of the fact that employees are paying attention to their pay stubs. Use the change as an opportunity to encourage your employees to:

  • Revisit their withholdings and update their W4s
  • Consider increasing their salary-deferral amounts
  • Recalculate retirement contributions

At Forrest Solutions, we have ensured compliance with the tax withholding changes and our employees saw shifts in their paychecks beginning January 19. Yet, along with assuring clients that we’re staying abreast of what happening with the IRS, we also want to remind you that our payroll experts are available to help you navigate the changes. If you have questions, we’re here to help!