The Internal Revenue Service has released guidelines for helping restaurateurs and other employers recalculate how much to withhold from employees’ paychecks under the new federal tax law.
The agency recommends that employers switch to the new withholding schedule as soon as possible, and no later than Feb. 15. The recalculations should be made to meet the withholding levels employees indicated on their current W-4 forms. The agency said that most people should see a bump in their take-home pay because of the new law’s lower rates.
The new schedules would not affect restaurants’ labor costs, since wages and salaries would not be raised. Rather, employees would keep more of what they currently earn under the new rates. However, many restaurant operations are expected to see a significant drop in the income taxes they and their shareholders pay.
The IRS said it intends to update the W-4 form in the near future. Changes in the form will reflect alterations in the law, such as an increase in the child tax credit.
More information on making adjustments will be forthcoming, the agency said.
“Payroll withholding can be complicated,” Acting IRS Commissioner David Kautter said in a statement. “In the weeks ahead, the IRS will be providing more information to help people understand and review these changes."
The new withholding schedule is available here.