The Internal Revenue Service said it is working on developing withholding guidance to implement the tax reform bill signed into law on December 22.
“We anticipate issuing the initial withholding guidance in January, and employers and payroll service providers will be encouraged to implement the changes in February,” said the IRS. “The IRS emphasizes this information will be designed to work with the existing Forms W-4 that employees have already filed, and no further action by taxpayers is needed at this time.”
Use of the new 2018 withholding guidelines will allow taxpayers to begin seeing the changes in their paychecks as early as February, the IRS noted. In the meantime, the agency advised employers and payroll service providers to continue to use the existing 2017 withholding tables and systems.
On Friday, the Treasury Department and the IRS issued Notice 2018-07, offering guidance to multinational companies on computing the “transition tax” under the Tax Cuts and Jobs Act. It said the Treasury and the IRS intend to issue regulations for determining the amounts included in gross income. The notice describes the treatment of deferred foreign income as Subpart F income. It describes the regulations the Treasury and the IRS intend to issue, including rules for determining the amount of cash and cash equivalents for purposes of applying the 15.5 percent rate and rules for determining the amount of foreign earnings subject to the transition tax. The rules should help taxpayers by providing certain additional information needed for computing their transition tax. Notice 2018-07 also asks for comments on the proposed rules along with comments on what additional guidance should be issued to help taxpayers compute the transition tax. The Treasury and the IRS intend to issue more guidance on the transition tax in the future.