Earlier today the IRS issued new withholding tables for 2018, along with an explanatory news release and a frequently asked questions document. The new tables reflect changes made by the tax reform legislation enacted last month. Employers should begin using the new tables as soon as possible, but not later than February 15.
The new tables are designed to work with existing Forms W-4, but the IRS intends to revise Form W-4 to reflect the legislative changes, including the increase in the standard deduction and the elimination of personal exemptions. Some employees, particularly employees who itemize deductions, may need to elect additional withholding to avoid being under-withheld under the new tables.
The guidance also clarifies that the new withholding rates for supplemental wages are 22% (for supplemental wages below $1 million) and 37% (for supplemental wages in excess of $1 million).