New Tax Bill of 2017 Affects Your Pay Check.
At the end of 2017, a significant new tax bill passed. The changes in withholding tables are the first in many steps the IRS is making to improve the accuracy of withholding taxes. You’ll begin to see a few changes including a reflection of the increase in the standard deduction, the repeal of personal exemptions and changes in the tax rates and brackets.
What do changes in withholding tables mean?
You should start seeing BIGGER paychecks. Employers should begin using the new withholding tables as soon as possible, but no later than Feb 15, 2018. For those employed by their own company, this is essential to implement with your payroll company sooner rather than later.
As soon as you start implementing the new withholding tables, you should see immediate changes to your paycheck. The whole purpose of this tax reform is to make things simpler and more accessible for tax reporting. One of the goals of the new withholding tables is to produce the correct amount of tax withholding for people with a more straightforward tax situation. Essentially, it helps them avoid over-or-under withholding of tax. Moreover, these changes have been designed to work with existing W-4 forms. Your employees would have already completed a W-4 form to claim their withholding allowances. Thus, it’s unnecessary to redo your W-4 forms in 2018.
The IRS anticipates making further changes involving withholding in 2019. Thus, you can expect to need to submit a new W-4 in 2019. However, the IRS has not completed the documentation yet. Therefore, the 2017 W-4 will be accepted until further notice.
What should you do now?
If you are using an existing payroll company, you may want to talk with your provider to determine your new paycheck amount & how these tables will affect you directly.
Paragon Accounting & Tax Solutions partners with small business owners for tax planning. We provide monthly accounting, tax preparation, and payroll services that simplify your busy work schedule. Talk to us today about how we can assist you with accounting and tax needs.