IRS Releases Withholding Guidance

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January 11, 2018

Earlier today, the IRS released new percentage method withholding tables for 2018 implementing the changes to major withholding provisions following the enactment of tax reform legislation.  In the revised Notice 1036, the IRS provided new withholding tables utilizing the value of personal exemptions that would have existed in the absence of tax reform and the existing withholding allowances claimed on employer’s Forms W-4.  The guidance also adjusts the amounts that must be added to a nonresident aliens’ wages to determine the proper amount of withholding.

In addition, the guidance sets the rates for optional flat-rate withholding on supplemental wages below $1,000,000 at 22%, mandatory flat-rate withholding on supplemental wages on $1,000,000 and above at 37%, and backup withholding at 24%.  The notice requires that the new withholding tables be implemented as soon as possible, but not later than February 15, 2018.