IRS to develop income tax withholding guidelines in response to tax reform changes

The IRS issued a statement on Dec. 26 regarding the expected timing of income tax withholding guidance in light of the tax reform bill signed into law on Dec. 22. IRS guidance is expected to be issued during January, and employers and payroll service providers are encouraged to implement the new withholding in February. The withholding updates will be compatible with existing Forms W-4. Until further guidance is issued, employers and payroll service providers should continue using the 2017 withholding tables and systems.

The IRS’s task has come under the scrutiny of Congressional Democrats, who are worried that the IRS and Treasury may under-withhold on individual taxpayers, and in effect increase after-tax income for 2018, with the offset being a smaller or no refund when those taxpayers file their individual returns in 2019. In a letter to David Kautter, Assistant Secretary of the Treasury for Tax Policy and acting IRS commissioner, top Democratic tax writers Sen. Ron Wyden, D-Ore., and Rep. Richard Neal, D.-Mass., expressed their concern about the Trump administration attempting to “systematically under-withhold income taxes during the 2018 tax year.” In a separate letter to the Government Accountability Office, Wyden and Neal asked the agency to review withholding tables issued by the IRS to determine whether they adequately withhold tax from taxpayers.

Eddie Adkins Partner, Washington National Tax Office
T +1 202 521 1565

Jeffrey Martin
Partner, Washington National Tax Office
T +1 202 521 1526

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