Recent Tax Law Changes and Their Impact on Employee Withholdings
Under the tax bill passed in December 2017, the Internal Revenue Service (IRS) has issued new withholding rates for employers. Harvard is now working to implement these changes in its systems.
What are the changes?
Federal tax withholding rates were updated to reflect the changes in tax rates and tax brackets, the increase in standard deductions, and the elimination of personal exemptions. As a result, withholding rates have decreased at most pay levels, but the effect on an individual’s paycheck will depend on his or her personal circumstances.
When will employees see the changes in their pay?
Employees should see the changes beginning with their regularly-scheduled paycheck paid on or after February 15.
Do employees need to do anything to respond to these changes?
Employees are not legally obligated to take any additional steps. However, the IRS advises individuals to check their withholding to ensure it is appropriate for their situation. In particular, some people have more complicated tax circumstances and face the possibility of being under-withheld (which may result in tax owed for the calendar year 2018 return and potentially a tax penalty) or over-withheld. For example, people who itemize their deductions, couples with multiple jobs, individuals with more than one job a year, or nonresident alien filers are encouraged to review their tax situations. Employees who desire advice regarding their personal situations are encouraged to consult with their own tax advisor.
The IRS has released an updated Withholding Calculator which gives employees the information they need to fill out a new Form W-4 (Employee's Withholding Allowance Certificate). While it is not required, you are encouraged to review the calculator, especially if you have one of the tax situations described above.
Harvard employees can update their W-4 via PeopleSoft Self Service:
Log into PeopleSoft and click on My Pay > W-4 Tax Information
For more information, please see the IRS FAQs.
Special Note for Nonresident Aliens
Nonresident aliens are directed by the Form W-4 instructions to see IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens, before completing the form. Nonresident aliens who wish to update their W-4 must submit a paper form to the Nonresident Alien Tax Office at 1033 Mass. Ave., 2nd Floor. Harvard's nonresident alien tax compliance system, GLACIER, can be used to prepare the W-4.