Employer Withholding Guidance Delayed Pending Tax Reform

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December 8, 2017

The increasingly likely prospect of a tax reform bill being enacted by the end of the year has prompted the IRS to delay annual withholding guidance, according to Scott Mezistrano of the IRS Wage and Investment Division’s Industry Stakeholder Engagement and Strategy Office.  It is expected that any tax reform bill would change tax rates, increase the standard deduction, and eliminate personal exemptions.  These changes will necessitate changes in withholding rates and withholding tables to ensure that employers withhold the appropriate amount of tax from employees’ wages.  Speaking on an IRS payroll industry monthly conference call on December 7, Mezistrano said that the guidance that will be delayed includes Form W‑4 (Employee’s Withholding Allowance Certificate), the withholding tables, Publication 15‑A (Employer’s Supplemental Tax Guide), and Publication 15‑B (Employer’s Tax Guide to Fringe Benefits).  Employers will likely be required to continue using the 2017 withholding tables and guidance into 2018, even if the tax reform legislation were to be signed into law before year end and the new tax rates were to take effect on January 1, 2018.  Employers would also be provided a transition period to implement the new IRS withholding guidance, according to Mezistrano.

Currently, a conference committee with selected lawmakers from both chambers is negotiating a final bill to reconcile the two versions of the GOP tax reform bill passed in the Senate (discussed here, here, and here) and in the House (discussed in an earlier series of posts).  A final negotiated bill would need to pass both chambers before the President can sign it into law.  We will continue to monitor tax reform legislation and related IRS guidance for further developments.