97% of Employers Met Deadline for New Withholding, Survey Says

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By Michael Trimarchi

About 97 percent of employers met the Feb. 15 deadline set by the Internal Revenue Service to start using the 2018 federal income tax withholding tables, results of a survey showed.

The survey by the American Payroll Association found that 75 percent of employers said they received many questions from employees, with most employees wanting to know why their net pay was increasing, how the federal tax code overhaul would affect income taxes in 2019, and whether they would need to file a new Form W-4, Employee’s Withholding Allowance Certificate.

“Input from our survey made it clear employees are worried they’ll be negatively affected by the new law once tax time 2019 rolls around,” said Michael O’Toole, senior director of publications, education, and government relations at the association. “It will be important for employees to quickly review their withholdings once the new Form W-4 is available to make sure they are not underwithholding on their federal taxes.”

The 2018 Form W-4, Employee’s Withholding Allowance Certificate, was released Feb. 27 by the IRS. The new form, which was released later this filing season than previously, was modified to reflect the changes under the recent federal tax code overhaul, which was signed Dec. 22 (Pub. L. 115-97).

The signing of the tax law occurred during the often-hectic year-end payroll-processing season, but 84 percent of employers essentially said felt no extra burden, compared with 16 percent that said they were burdened, the survey said.

About 57 percent of employers informed employees that the tax reform law would affect paychecks, the survey said. Employees were not informed at 30 percent of the companies, it said.

Seeking Advice on Taxes

The IRS generally advises employees to check withholding amounts to determine if they remain accurate under the new tax law. The law, which took effect Dec. 22, retained the seven individual federal income tax brackets but lowered most of the rates, including the highest one. The rates of 10, 12, 22, 24, 32, 35, and 37 percent took effect Jan. 1, 2018, and expire Dec. 31, 2025. Additionally, personal exemptions were suspended from 2018 to 2025. In 2017, a withholding allowance was the equivalent of the single personal exemption of $4,050.

“Payroll offices and human resource departments are responsible only for processing the Form W-4,” the IRS said. “It’s important to remember people working in these offices do not know the rest of your personal financial situation, and they are not responsible for giving you tax advice. If you have tax questions, consult with a trusted tax professional.”

The association’s “Tax Reform Membership Survey” received responses from more than 1,000 finance professionals, 84 percent of whom said that dealing with payroll was their primary role at their company. About 63 percent of those surveyed said payroll processing was an in-house endeavor, compared with 37 percent whose companies contracted with a third-party payroll vendor.

To contact the reporter on this story: Michael Trimarchi in Washington at mtrimarchi@bloombergtax.com. To contact the editor responsible for this story: Michael Baer at mbaer@bloombergtax.com.

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