New 2018 Payroll Tax Updates

Based on the Tax Cuts and Jobs Act that recently went into effect, numerous changes were made that will impact individual taxpayers in 2018. Please find below newly released updates for 2018 payroll taxes:

New Withholding Tables

The IRS issued new withholding tables on January 11, 2018 that were included in the IRS Notice 1036, which can be found here.

These new withholding tables are designed to be used in conjunction with previously filed W-4 forms and should be implemented when practical, but no later than February 15, 2018. New W-4 forms are not required.

Supplemental Wages

If a supplemental wage payment is made separately from base wages, different methods need to be used to determine the withholding taxes.

If the supplemental wage payment is under $1 million, for withholding taxes:

  1. It can be combined with base wages and the appropriate withholding should be taken.
  2. Withholding can be taken at 22% (no other percentage can be used).

If the supplemental wage payments made during the year exceed $1 million, the withholding rate is 37% (or the highest rate of income tax for the year) on the portion in excess of $1 million.

Backup Withholding Rate

For any payments subject to backup withholding, the rate is 24%.

Additional tax items of which to be aware of:

  1. Moving Expenses – Reimbursements or direct payments are included in taxable wages.
  2. Bicycle Commuting Benefits – These are now included in taxable wages.


As we continue into 2018 we expect additional updates to be released. Sax will keep you informed of any additional changes. For further information, please contact Alan S. Isaacs, CPA, MBA at [email protected].

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