The Internal Revenue Service and the Treasury have proposed regulations updating the income tax withholding rules to reflect the changes in the Tax Cuts and Jobs Act, the recently redesigned Form W-4 and the IRS’s new Tax Withholding Estimator.
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The proposed regulations allow employees to use the new IRS
The proposed regulations also deal with various other tax-withholding issues. They offer some more flexibility in how employees who don’t fill out a W-4 should be treated. Starting this year, employers are required to treat new employees who fail to furnish a properly completed Form W-4 as single and withhold using the standard deduction and no other adjustments. Before this year, employers in this situation were required to withhold as if the employee was single and claiming zero allowances.
In addition, the proposed regulations spell out the rules for when employees must furnish a new Form W-4 for changed circumstances, update the regulations for the lock-in letter program, and eliminate the combined income tax and FICA (Social Security and Medicare) tax withholding tables.
To help figure the proper income tax withholding, the redesigned Form W-4 no longer uses an employee’s marital status and withholding allowances, which were tied to the value of the personal exemption. Because of changes under the 2017 tax overhaul, employees can no longer claim personal exemptions. Instead, income tax withholding using the redesigned Form W-4 is mainly based on an employee’s expected filing status and standard deduction for the year.
The Form W-4 has also been redesigned to make it simpler for employees who have more than one job or married employees who file jointly with their working spouses to withhold the correct amount of tax.
Employees can opt to have itemized deductions, the child tax credit and other tax benefits reflected in their withholding for the year. As in the past, employees can decide to have an employer withhold a flat-dollar extra amount each pay period to cover, for instance, income they get from other sources that’s not subject to withholding. Under the proposed regulations, employees now also get the option to ask their employers to withhold additional tax by reporting income from other sources not subject to withholding on the Form W-4.
The Treasury and the IRS are asking for comments from the public on the proposed regulations, which contain information on how to submit comments.
