The US Internal Revenue Service (IRS) has released Notice 1036, updating the income tax withholding tables for 2018 reflecting changes to personal tax rates made by the US tax reform legislation enacted in December
The updated withholding information, available on IRS.gov, shows the new rates for employers to use during 2018. Employers should begin using the 2018 withholding tables as soon as possible, but not later than 15 February 2018. They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.
The revised withholding tables are designed to work with the Forms W-4 that employees have already filed with employers to claim withholding allowances. This will minimise burden on taxpayers and employers. Employees do not have to do anything at this time.
For social security, the tax rate is 6.2% each for the employee and employer, unchanged from 2017. The social security wage base limit is $128,400 (£94,137)
The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2017. There is no wage base limit for Medicare tax.
In addition to withholding Medicare tax at 1.45%, employers must withhold a further 0.9% Additional Medicare Tax from wages paid to an employee in excess of $200,000 (£146,600) in a calendar year. This must start in the pay period in which wages are paid in excess of $200,000 to employees and be withheld for each pay period until the end of the calendar year.
Additional Medicare Tax is only paid by employees. There is no employer contribution.
The IRS is also working on revising Form W-4.
Form W-4 and the revised calculator will reflect additional changes in the new law, such as changes in available itemised deductions, increases in the child tax credit, the new dependent credit and repeal of dependent exemptions.