|Jan 15 2018||
Changes In Payroll Tax for 2018
By: Rob Lynn
A couple payroll tax changes:
First, the Social Security Wage taxable earnings cap has increased $1,200 to $128,400, which is based on the government's estimate of recent inflation-adjusted wage growth. The $1,200 is roughly a 1% increase, which is significantly smaller than the 2017's 7.3 percent. Just two years ago the earnings cap was $118,500, so if you take the $9,900 increase over two years and multiply that by the combined employer/employee OASDI of 12.4% that is an annual tax increase of $1,227.60 since 2016 for those twelve million plus that meet the earnings cap.
Second, the 2018 withholding tables will be changed no later than 2/15/18. The updated withholding information shows the new rates for 2018 and they reflect the increase in the standard deduction, repeal of personal exemptions and changes in tax rates and income brackets. For employees with straightforward tax returns, the new tables should produce an accurate amount of tax withholding, and greatly reduce the over/under withholding. With the new withholding rates, the Trump administration expects near ninety percent of wage earners to have net increases in their paychecks. The time it will take for employees to see the changes in their paychecks will vary depending on how quickly the new tables are implemented by their employers. Total Team Solutions is anticipating having the tables update by 2/1/18 for their clients.
The IRS has not provided a revised W-4 for 2018 which upon completion, will reflect the new law regarding available itemized deductions, increases in the child tax credit, the new dependent credit and repeal of dependent exemptions. For now, the 2017 W-4 works just fine with the 2018 withholding tables and so no additional steps are necessary at this time.
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