2018 Tax Cut Cheat Sheet for Employers

The United States Congress passed the Tax Cuts and Jobs Act of 2017 on December 20, 2017.

Payroll Mate is helping employers and tax professionals comply with the new regulations.

The Payroll Mate team put together this “cheat sheet” that covers some of the common questions employers have about the new bill:

When will the IRS publish the 2018 withholding tables?
In a statement on December 13, 2017, the IRS said they will be publishing Notice 1036 (Early Release Copies of the Percentage Method Tables for Income Tax Withholding) in January 2018.

When will Payroll Mate be updated with the 2018 Tax Cut changes?
As soon as the IRS publishes Notice 1036, our development team will start implementing and testing the 2018 federal withholding calculations.

What are the new withholding rates?
The new rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

What is the new standard deduction?
$12,000 for single filers, $24,000 for married joint filers, and $18,000 for heads of household.

What is the new personal exemption?
The personal exemption has been repealed. So there is no personal exemption starting in 2018.

What are the new flat withholding rates?
For supplemental wages up to $1 million, the optional flat rate is 22%.
For supplemental wages in excess of $1 million, the mandatory flat rate is 37%.

What is the mandatory backup withholding rate?
The mandatory backup withholding rate (applies when independent contractors don’t give you their taxpayer identification number before you pay them) is 24%.

Will form W-4 get updated?
Yes, most probably employee form W-4 will have “structural changes” and a new version will be published by the IRS.

Do we need to file forms 1095-C / 1094-C for 2017?
The final tax reform bill (which takes effect in 2018) eliminates (makes it $0) the tax penalty levied on individuals who don’t obtain health insurance. However applicable large employers still have to furnish copies of Form 1095-C to their employee by the end of January and to file those forms, along with the transmittal, Form 1094 – C, with the IRS by Feb. 28, for paper filers, or by April 2, for e-Filers.

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