2018 early release notice 1036

An early release notice was published by the IRS on January 9, 2018 providing an initial look at the upcoming federal income tax withholding rate changes.

Notice 1036: Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding

These are not the official tax tables.  Publication 15/Circular E has not yet been released.

In a related updated 2018 statement, the IRS has indicated that:

Employers should begin using the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018. They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.

Some initial changes besides those outlined in a prior recent blog post include:

The annualized withholding allowance is now $4,150 (it was $4,050). This corresponds to the Advanced Accounting US0 tax code that users will need to update in due course.

The supplemental wage withholding is now 22% (was 25%). This is the first year that rate has changed in quite some time. This change is not end user configurable but will be available in our 2018 payroll updates that will be released later this month as the dust continues to settle.

Comments:

A curious aspect of these tables relate to withholding allowances.  Since personal exemptions have been eliminated, why then are there still withholding allowances?

While we have not yet seen a specific answer to this question, because the IRS wanted to allow employers to continue to use existing W-4 forms and due to the last minute nature of the new law, the rate calculations are presumably attempting to take the elimination of personal exemptions somehow into account.  It is hard to see however how well that will work by year's end, at least for some employees.

Other miscellany:

A new form W-4 will ultimately be forthcoming but existing W-4 forms can continue to be used.

Yesterday we made some changes to the 941 worksheet option to synchronize it with the numbered lines on the IRS 941 form including the currently released draft form for 2018.  That update will be included in the payroll updates to be released later this month for Advanced Accounting.