It is one thing for Congress to pass a tax bill but it is quite another to see increases in the paychecks of employees – especially the paychecks of America’s small businesses. The mechanical process of increasing paychecks is dependent of the system of controls used by employers and their payroll contractors. The IRS recently issued statements saying that might happen by the end of February 2018 thanks to the independent efforts of payroll companies acting more quickly than the IRS. But for small businesses the process of boosting employee paychecks may take longer.
As of today. February 21, 2018 this is where small businesses stand on he issues:
- Form W4 for 2017 is obsolete bu can be used until February 28, 2018 per IRS Notice 2018-14
- IRS has not yet issued a new Form W4 for 2018. (A draft version published cannot actually be used yet because it is missing important information). Obviously employers will not have time to have the new forms. when issued, executed and in use by March 1, 2018.
- Revised 2018 withholding tables are available so employers should be clear on their legal requirement to withhold payroll taxes.
Payroll accountants and their software platforms are generally proficient in these matters so the only problems I expect are among those relatively few ‘do-it-yourself’ manual payroll operations.
While this article focuses on employer actions and responsibilities, I strongly recommend that individual taxpayers prepare an estimate of 2018 taxes based on the new law to accurately plan for payroll tax withholding.
I am pleased to discuss this issue as it relates to your small business.