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Monthly Archives / March 2018

  • Mar 06 / 2018
What's New

2018 Pension Plan Limits Not Affected by Tax Reform Law

The IRS has announced that the Tax Cuts and Jobs Act’s (TCJA; Pub. L. 115-97) new formula for calculating inflation adjustments under the Internal Revenue Code (IRC) using the Chained CPI-U do not affect the tax year 2018 dollar limitations for retirement plans the agency released last October. The IRS announced limitations for tax year 2018 in IRS Notice 2017-64

The Treasury is required to annually adjust dollar limitations on benefits and contributions under qualified retirement plans for cost-of-living increases. Adjustments are made using procedures similar to those used to adjust benefit amounts under the Social Security Act. Because the recently enacted TCJA made no changes to the section of the IRC limiting benefits and contributions for retirement plans, the qualified retirement plan limitations for tax year 2018 remain unchanged.

The IRC does specify that contribution limits and income thresholds related to Individual Retirement Arrangements (IRAs) are to be adjusted annually using procedures that are used to make cost-of-living adjustments that apply to many of the basic income tax parameters. Although the TCJA changed how these adjustments are made, after taking the applicable rounding rules into account, the previously announced amounts for 2018 related to IRAs also remain unchanged.

  • Mar 06 / 2018
What's New

IRS has released the 2018 Form W-4

The IRS has released the 2018 Form W-4, Employee’s Withholding Allowance Certificate, and an updated version of its Withholding Calculator. Both the form and the calculator have been revised to reflect changes in the tax law made by the Tax Cuts and Jobs Act (Pub. L. 115-97). On February 28, the IRS released the 2018 Form W-4, Employee’s Withholding Allowance Certificate, and its updated Withholding Calculator. Both the form and the calculator have been updated to reflect changes in the tax law made by the Tax Cuts and Jobs Act (Pub. L. 115-97). Now that these tools are available, the IRS is suggesting that employees do a “Paycheck Checkup,” to check that they are having the correct amount of tax withheld from their paycheck.

Revised Form W-4

The new instructions explain how employees can claim exemption from withholding; suggest that employees use the tax calculator if they have a complex tax situation; and provide additional guidance to filers with multiple jobs or a working spouse, nonwage income, or are nonresident aliens.

The three worksheets used to determine the number of allowances to claim – Personal Allowance Worksheet; Deductions, Adjustments, and Additional Income Worksheet; and the Two-Earners/Multiple Jobs Worksheet – have all been updated. For instance, the Personal Allowance Worksheet includes information on the child tax credit and the credit for other dependents.

Withholding Calculator

In a press release announcing the release of the 2018 Form W-4 and the Withholding Calculator, IRS Commissioner David Kautter explained the importance of using these tools. “Withholding issues can be complicated, and the calculator is designed to help employees make changes based on their personal financial situation,” he said. “Taking a few minutes can help taxpayers ensure they don’t have too little – or too much – withheld from their paycheck.”

By working through the questions in the calculator, employees will learn if they should make changes in their withholdings. If changes are needed, the calculator gives employees the information they need to fill out a new Form W-4.

Courtesy of APA staff.

 

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