New W-4 guidance for Payroll, straight from IRS

The aftershocks from the new W-4 and updated withholding tables just keep on coming!

IRS and the Treasury Department just released proposed regulations to reflect the changes to come out of the Tax Cuts and Jobs Act.

And they should give your payroll department some welcome clarity.

First, a key reminder: The regs make it clear that employees don’t need to fill out a new W-4 simply because there’s a new form.

But the proposed W-4 guidance does provide rules under which you, as employer, must require a new W-4 from an employee. (Encourage folks to use the new online calculator – IRS does, too.)

Who needs to fill out a new W-4

1. An employee’s filing status changes. If an employee’s “married filing jointly” status changes to “single” (including “single filing jointly”) or “head of household,” the employee needs a new W-4. And the same holds true if someone’s status changes from “head of household” to “single.”
2. Someone starts a second job. Employees who start another job and submit a W-4 for it with higher withholding rate tables must give the first employer a new W-4. And the same applies if a spouse does this and the couple files jointly.
3. An employee with multiple jobs receives a big raise. When someone has multiple W-4s, completed one form using the multiple job procedures and expects to receive a raise of at least $10,000 a year, the employee must submit a new W-4 updating the multiple jobs procedures section to that employer.
4. An employee can no longer claim a child for the tax credit. If someone claims the child tax credit and expects the number of qualifying children to change, you must receive a new W-4.
5. Other tax credits can’t be claimed. Similarly, if the total amount of tax credits an employee can no longer claim exceeds $500, the person needs to submit a new form.
6. The employee’s deductions change. Employees who expect the itemized deductions they claim on their taxes to decrease by more than $2,300 should fill out an updated W-4.
7. A worker’s no longer tax exempt. Someone who now expects to pay taxes should give your company a new W-4.

And if they don’t, here’s withholding advice

Also, the new W-4 guidance clarifies that your company must now treat new employees who fail to furnish a properly completed W-4 as single and withhold using the standard deduction and no other adjustments.