Business Consultants & Certified Public Accountants

The Old & the New W-4

Anne Kelly, CPP

When changes are on the horizon, it’s a good time to look at current practices and how we need to change to keep up with the changing environment.  The 2018 Form W-4 has not yet been released due to the recent rate and bracket changes made in the Tax Cuts and Jobs Act.  (However, the new tax withholding tables are in effect, and you need to be sure that your business is using them for all payrolls dated February 15 or later.)  When the 2018 form is released, employers are required to put it into use within 30 days of its release and stop using the 2017 version.

PBGW and CASI Payroll Plus strongly encourages employers to have all of their employees complete the 2018 Form W-4 when it is released, which we expect to be sometime around the end of this month or beginning of March.  This will encourage employees to consider their tax situation and contemplate how next year’s tax filing might look.  I’ve worked in payroll long enough to have had a number of clients’ employees complain to their HR or payroll department about owing more tax than they can afford and wanting to put blame on the company or the payroll processor for the situation.  Of course, if the employer is following the employee’s current W-4, the employer is not to blame for the employee’s tax situation.  We note, however, that no HR, payroll, bookkeeper or other employee or owner should give tax or investment advice to an employee, unless the advisor is a professional advisor paid by the employer to do so.  Instead, employers should tell their employees to speak to their own tax advisor.

As we look for changes to the W-4 form, we take this opportunity to point out general requirements and best practices related to this important employee form:

  • Make sure that the W-4 you are using with employees is the full form including instructions (currently two pages).
  • A signed W-4 is required to make a change in an employee’s withholding.  An employer should never make a change based on an employee’s verbal or emailed request.
  • An employer is required to begin withholding according to the employee’s newly completed W-4 form no later than the start of the first payroll period ending 30 days from the day the employer receives the form.  This includes time for your payroll company to process the change.
  • Employers MUST have an employee who claimed exempt on their W-4 complete a new W-4 no later than February 15*, or the employer MUST withhold based on the prior valid W-4 (without an exempt status) or withhold at the single status with 0 allowances.  *For 2018 only, this deadline has been extended to February 28.
  • Employers must retain copies of each employee’s most current W-4, and prior forms at least 4 years after the date it was last used.

Please call Anne Kelly, Payroll Administrator, or your accountant if you have questions about your W-4 forms.