On February 27, the IRS released the 2018 Form W-4, Employee’s Withholding Allowance Certificate. While the new tax law has eliminated personal exemptions, the IRS has used basically the same method for determining withholding allowances as the 2017 Form W-4 did.
2018 Publication 15-A, Employer’s Supplemental Tax Guide/Supplement to Publication 15, Employer’s Tax Guide, was also released, as well as:
Form 941, Schedule R, Allocation Schedule for Aggregate Form 91 Filers (Rev. January 2018).
Details of the 2018 Form W-4
The new personal allowances worksheet has been expanded from 2 pages to 4. It explains how tax payers can apply the credit for dependents as they calculate withholding allowances. The portion of the completed form that will be submitted to the employer looks very similar to the 2017 form. The worksheet is also very much like the 2017 version, except that it accommodates changes of the new tax law.
Form W-4 tells the employer about the employee’s marital status and how many withholding allowances they want to claim for federal income taxes. The 2018 allowance for one withholding allowance increased to $4150 from $4050 in 2017.
Line 5 of the new form shows Total Number of Allowances You Are Claiming. Tax payers can follow the new calculation method on the worksheet or they can use a new withholding calculator, which will be made available at www.irs.gov/W4app once it is released. Tax payers who make use of the calculator do not need to use the Form W-4 worksheets.
The 2018 Form W-4 is released in conjunction with the 2018 withholding tables that were released in January 2018 and Publication 15, (Circular E), Employer’s Tax Guide.
The new tax code still calls for 7 tax brackets, but most of the rates were lowered. The rates that went into effect on 1/1/18 are 10, 12, 22, 24, 32, 35, and 37. These rates are to remain in effect until 12/31/25.