Effective January 17, 2018

2018 Federal Percentage Method Income

The New Federal Tax Withholding Tables were released on January 11, 2018 and implemented for EP payroll released on Wednesday, January 17, 2018. The new withholding tables are designed to work with the Forms W-4 that employees have already filed with their employers to claim withholding allowances. This is intended to minimize the burden on employees and employers. Employees do not have to do anything.

Rates for Withholding on Supplemental Wages for 2018

There is a two-tiered system for withholding income tax from supplemental wages at a flat rate:

  • Optional flat rate: 22% for supplemental wages up to and including $1 million (the rate was 25% in 2017)
  • Mandatory flat rate: 37% for supplemental wages over $1 million (the rate was 39.6% in 2017)

Backup Withholding Rate

Payers of reportable payments generally must backup withhold 24% for federal income tax if the payee fails to provide a correct Taxpayer Identification Number (TIN) on Form W-9 (the rate was 28% in 2017).

Qualified Moving Expenses

This fringe benefit will be suspended for tax years 2018 through 2025.

Background: Through 2017, the Internal Revenue Code provided an exclusion from employees’ income for qualified moving expense payments and reimbursements made by employers. Qualified moving expenses were the cost of packing, moving and unpacking household goods and the transportation cost of the individual (and family) to move to the new location (plane tickets or mileage reimbursement).

Affordable Care Act (ACA) Individual Mandate

The tax reform legislation eliminates the penalty for individuals not having health insurance, beginning in 2019. However, it does not change the obligation of applicable large employers to offer ACA-compliant insurance to their full-time employees and to report on the offer.

If you have any questions, please contact Tax Support at 818.480.7333 or taxsupport@ep.com.