While last year's withholding schedules might make good confetti, payroll providers probably aren't looking forward to 2018 quite as much as the rest of us, and their New Year's Day hangovers may pale by comparison of the payroll tax headaches that lie ahead...
The massive new tax law that goes into effect January 1 is expected to sow a lot of temporary angst and confusion as payroll providers await new tax tables and guidance for adjusting the federal withholding portion of all of those paychecks due as part of their first payroll run.
While the law takes effect immediately, the elimination of personal exemptions, changes to standard deductions and lowered tax rates won't start affecting paychecks right away. The IRS has just released new tax withholding tables and the changes to deductions could mean employees have to fill out a new W-4.
Given all of the above, payroll clients of SBS need not worry: our experts are on top of all of the above, so you don't have to be.
A delay could mean more adjusting at tax time if withholding is too high or too low, but in the short term, some employees may have to wait through a pay period or two to see the effects of any reduced withholding on their take home pay.
The IRS has said it will issue guidance in January and that taxpayers should see the effects of any changes in withholding by February, even if no new W-4s have been completed. But no one expects the process to be easy, least of all those in the payroll industry.
Michael O'Toole, senior director of government relations for the American Payroll Association told the Chicago Tribune that it could take some time for employees to work through the changes that affect them and complete a new W-4. The changes will not affect the amount withheld for Social Security and Medicare taxes, he said.
The APA warned lawmakers in early December that employers and payroll providers faced a "herculean" task of implementing such dramatic changes with so little time to do it. The organization called for a period of transition relief for employers, protecting them from penalties for failing to properly withhold or deposit federal income taxes through 2018.
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You're not alone. Let us worry about all the new payroll tax withholding issues your organization will face in 2018. Our payroll experts can review your account, make recommendations and you have the option to use our services to make your life a lot easier and stress free, while those that don't have to stock up on antacid.