During its December payroll industry conference call, the IRS indicated that guidance for the 2018 tax year, including the 2018 withholding tables, will be issued later than usual due to the potential tax changes that are being considered in the current congressional push to enact tax reform.

Tax reform process moving swiftly

The House passed its tax reform bill, H.R. 1, the Tax Cuts and Jobs Act, on November 16; and the Senate passed its own version on December 2. A Conference Committee, with members from both houses of Congress, will work to reconcile the differences between the two bills. President Trump and Republican congressional leaders are working to pass and enact the final tax bill before Christmas.

Both bills include changes to income tax rates, standard deductions, and personal exemptions, effective after December 31, 2017, so the withholding tables and Form W-4 would need substantial revisions.

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Delayed guidance for 2018

Scott Mezistrano, IRS Industry Stakeholder Engagement and Strategy, told conference call attendees that the IRS is monitoring the legislation and that once any tax bill becomes law, the IRS will move to “quickly assess the impact and start the implementation activity.” Because of the potential tax changes, the IRS is waiting to release certain guidance for 2018, including the 2018 withholding tables, Form W-4, Employee’s Withholding Allowance Certificate; Circular E, Employer’s Tax Guide (Publication 15); Employer’s Supplemental Tax Guide (Publication 15-A); and Employer’s Tax Guide to Fringe Benefits(Publication 15-B).

Employers may need to continue using the 2017 withholding tables and guidance until the 2018 versions are released. Mezistrano told attendees that even if new tax rates take effect on January 1, 2018, the IRS will need time to incorporate all of the changes made by the new law. He also acknowledged that payroll professionals would need time for programming and testing, so there will be a transition period to comply with the new withholding tables. Mezistrano explained that this type of transition period is not new. A similar procedure was followed by the IRS in 2009 when legislation was enacted that required changes to the withholding tables early that year.