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IRS Releases New Form W-4 for 2018

With the new tax law, how much will you owe the IRS when you file your 2018 tax return next April?

Now that most of our clients have their 2017 taxes filed, it is time to start taking action regarding 2018 taxes. The Tax Cuts and Jobs Act or TCJA has an impact on just about every area of tax one can think of in 2018. These changes include increasing the standard deduction, removing the personal exemption, and changing the tax rates and brackets. The impact of these changes will affect both employees and business owners. The first effect you or your employees might notice is that some employees’ take-home pay may have increased due to the adjustment in IRS withholding tables. These larger paychecks are wonderful, but employees should be cautious. An increase in take-home pay might be deceiving because you may actually be under withholding your federal income taxes. If your pay is being under-withheld, it could be a big shock come tax time when you owe the IRS money next April. In order to avoid a surprise tax bill for the 2018 tax year, employees should update their W-4 form. To help individuals deal with 2018 withholding issues, the IRS has recently released a new W-4 Form for 2018 and a Withholding Calculator.

The W-4 form is how employees tell their employers how much money to withhold from their paychecks. All new hires after March 30th, 2018 are required to use the new 2018 W-4 form. However, current employees who have filled out older versions of the W-4 are not required to update their W-4. Even though current employees are not required to update their W-4s the IRS is encouraging all employees to review their withholdings for 2018. The IRS is worried people may have dated withholding calculations based on the previous tax law. In order for employees to better understand how much tax should be withheld from their paychecks for 2018, the IRS has released a new tool called the Withholding Calculator.

The IRS Withholding Calculator is intended to help employees make changes to their W-4 based on their specific financial situation. Having a copy of one’s completed 2017 taxes will help you navigate your way through the questions asked by the IRS Withholding Calculator. The information on your 2017 taxes will help you input accurate estimates for the 2018 tax year. After imputing all the data that the IRS Withholding Calculator requires, the calculator will output the information needed to update one’s W-4. Employers should encourage employees to use the IRS Withholding Calculator. ADP has put out a sample notice employers can provide to your employees informing them be aware of withholding changes and consider filling out a new W-4. (See sample notice below)

As an employee, making sure that you are having the right amount of money withheld from your paychecks is crucial to avoiding a tax bill next April. While the IRS is advising everyone to review their withholdings it is especially important for two-income families, people with two or more jobs at the same time, people who only work part of the year, people with children who claim credits such as the Child Tax Credit, people who itemized deductions in 2017, and people with high incomes and more complex tax returns. These groups of people are specifically affected by the changes in the tax law.

However, everyone should use the IRS Withholding Calculator to estimate their 2018 withholdings. This simple action will save you from a surprise tax bill next April. Contact your tax professional if you need help determining the amount that should be withheld from your paychecks in 2018.

Bill Hesch is a CPA, PFS (Personal Financial Specialist), and attorney licensed in Ohio and Kentucky who helps clients with their financial and estate planning. He also practices elder law, corporate law, Medicaid planning, tax law, and probate in the Greater Cincinnati and Northern Kentucky areas. His practice area includes Hamilton County, Butler County, Warren County, and Clermont County in Ohio, and Campbell County, Kenton County, and Boone County in Kentucky.

(Legal Disclaimer: Bill Hesch submits this blog to provide general information about the firm and its services. Information in this blog is not intended as legal advice, and any person receiving information on this page should not act on it without consulting professional legal counsel. While at times Bill Hesch may render an opinion, Bill Hesch does not offer legal advice through this blog. Bill Hesch does not enter into an attorney-client relationship with any online reader via online contact.)

IRS Withholding Calculator

Example Notice to Employees

Re: 2018 Income Tax Withholding

Dear ____________:

You may have noticed lower federal income tax deductions and a corresponding increase in net pay in your recent paychecks.

The recent Tax Cuts and Jobs Act (TCJA) changed federal income tax rates and brackets, among other things, beginning in 2018. New IRS withholding tables were put into effect in late January.

The TCJA generally reduced federal income taxes for most people. However, depending on your specific tax situation, you might owe additional tax when you file your 2018 income tax return, even if you normally receive a tax refund from the IRS at year-end.

You may want to consider updating your withholding allowances at this time. The IRS recently released the 2018 Form W-4, (Employee’s Withholding Allowance Certificate), and related instructions, which you can find at

The IRS also offers an online “W-4 Calculator,” at This calculator may help you determine the correct number of withholding allowances to claim.

The IRS will not require all employees to file a new Form W-4 for 2018. However, for some people it may be advisable. The TCJA made many other changes that could affect your 2018 income taxes. For questions regarding your personal tax situation, talk with your tax advisor, or visit