In 2018, the IRS adjusted income tax withholding tables to reflect the Tax Cuts and Jobs Act. The IRS released changes to the income tax brackets for 2019.
When you have employees, you need to stay on top of changing employment tax rates. Rates impact the amount of money you withhold from employee wages. Are you familiar with the 2019 income tax withholding tables?
Below, you will first find information about how withholding tables work. Then, you can learn about changes to the federal income tax withholding tables.
What are income tax withholding tables?
You must use an employee’s Form W-4 and the income tax withholding tables to determine how much federal income tax to withhold from employee wages.
New hires are required to fill out Form W-4, Employee’s Withholding Allowance Certificate, when they start working at your business. On this form, your employees can claim withholding allowances. The more allowances an employee claims, the less you withhold in federal income tax. Employees can claim allowances for many reasons, including if they have dependents.
Once you have an employee’s withholding allowance information, you must use the income tax withholding tables in IRS Publication 15 to determine federal income taxes. These tables provide ranges based on pay frequency, filing status, and withholding allowances.
There are two methods you can choose from to determine an employee’s federal income tax withholding:
- Wage bracket method
- Percentage method
Wage bracket method
If you use the wage bracket method, you must find the range the employee’s wages fall under. Then, using their claimed allowances, find the amount to withhold.
The percentage method is a little different. You must multiply the amount of one withholding allowance (explained below) by the number of allowances the employee claims and subtract that from the employee’s wages. Then, you must find the range for that number and calculate the tax amount.
2019 income tax withholding tables
The Tax Cuts and Jobs Act of 2017 brought changes in tax rates and brackets, an increase in the standard deduction, and the elimination of personal exemptions.
In 2018, federal income tax withholding tables changed significantly from 2017. These changes increased many employees’ paycheck amounts throughout the year.
The IRS changed federal income tax brackets and tables again for 2019. And, the standard deduction went up. Personal exemptions are still eliminated.
The changes between tax years 2018 and 2019 are slight compared to the change between 2017 and 2018.
The IRS also updated their federal tax calculator for withholding in 2019. Individuals can use this tax calculator to determine their tax liabilities.
Changes to the income tax withholding tables and standard deduction amount don’t mean your employees will receive a higher refund at tax time. Encourage your employees to use the IRS’s tax calculator.
Revised Form W-4
There is a 2019 version of Form W-4 on the IRS’s website. However, the IRS is working to change up the withholding form for 2020.
The revised Form W-4 that the IRS plans to release in 2020 aims to better reflect the new tax law. Individuals will be able to use the updated form to better prevent over- and under-withholding taxes.
The IRS is currently accepting feedback on Form W-4.
Did supplemental and backup withholding taxes change?
In 2018, the income tax withholding tables weren’t the only updates. Supplemental wages and backup withholding rates changed, too.
Withholding on supplemental wages fell from 25% in 2017 to 22% in 2018. The backup withholding rate fell from 28% in 2017 to the updated 24%.
How do these rates compare in 2019?
Both the 2018 supplemental wage rate of 22% and the backup withholding rate of 24% remain the same in 2019.
How will this affect employees?
So, what do the adjusted federal income tax brackets and increased standard deduction mean for your employees? Take a look below.
Federal income tax table changes
The IRS publishes pages of federal income tax tables. Although we aren’t going to include all the income tax withholding tables, we will show the difference in the amount for one withholding allowance.
Use this chart to see amounts for one withholding allowance in 2017, 2018, and 2019. Remember, this is the amount you subtract from the employee’s wages to determine withholding using the percentage method.
The higher the withholding allowance, the more likely you will withhold less in federal income taxes.
|Payroll Period||One Withholding Allowance (2017)||One Withholding Allowance (2018)||One Withholding Allowance (2019)|
|Daily or miscellaneous (each day of the payroll period)||$15.60||$16.00||$16.20|
Standard deduction increase
Here are the standard deduction amounts for 2019, along with the 2018 and 2017 rates.
|Filing Status||Standard Deduction (2017)||Standard Deduction (2018)||Standard Deduction (2019)|
|Married Filing Jointly||$12,700||$24,000||$24,400|
|Married Filing Separately||$6,350||$12,000||$12,200|
|Head of Household||$9,350||$18,000||$18,350|
2019, 2018, and 2017 comparison example
Let’s see how much you would withhold for an employee in 2019 compared to 2018 (after the Tax Cuts and Jobs Act) and 2017 (before the Tax Cuts and Jobs Act).
You have a married employee with one withholding allowance and no pre-tax deductions. They earn $700 weekly. Using the above chart, you can see that the amount for one withholding allowance is $80.80 in 2019.
1. First, subtract $80.80 from $700 to get $619.20.
2. Using the 2019 income tax withholding tables, you find that this amount of $619.20 falls in the “Over $600 but not over $1,745” range. Look at the amount to withhold for this range.
3. The amount of income tax you must withhold for this range is $37.30, plus 12% of excess over $600.
4. Subtract $600 from $619.20 to determine the excess, which is $19.20. Then, multiply $19.20 by 12%. After, add that number to the flat rate of $37.30:
$619.20 – $600 = $19.20
$19.20 X 0.12 = $2.30
$2.30 + $37.30 = $39.60
You withheld $39.60 from the employee’s wages for federal income tax per pay period.
Now, let’s see how much you would withhold for an employee in 2018, assuming all the facts (pay frequency, wages, withholding allowances, and filing status) are the same.
Using the above chart, you can see that the amount for one withholding allowance is $79.80 in 2018.
1. First, subtract $79.80 from $700 to get $620.20.
2. Using the 2018 income tax withholding tables, you find that this amount of $620.20 falls in the “Over $588 but not over $1,711” range. Look at the amount to withhold for this range.
3. The amount of income tax you must withhold for this range is $36.60, plus 12% of excess over $588.
4. Subtract $588 from $620.20 to determine the excess, which is $32.20. Then, multiply $32.20 by 12%. After, you must add that number to the flat rate of $36.60:
$620.20 – $588 = $32.20
$32.20 X 0.12 = $3.86
$3.86 + $36.60 = $40.46
You must withhold $40.46 from the employee’s wages for federal income tax per pay period.
As you can see, you would withhold $0.86 less ($40.46 – $39.60) from your employee’s wages in 2019 than you did in 2018.
Now, let’s see how much you withheld for that same employee using the 2017 tax tables. Again, the employee’s pay frequency, wages, withholding allowances, and filing status remain the same.
Using the above chart, the amount for one withholding allowance is $77.90 in 2017.
1. First, subtract $77.90 from $700 to get $622.10.
2. Using the 2017 income tax withholding tables, you find that the amount of $622.10 falls in the “Over $525 but not over $1,626” range. Look at the amount to withhold for this range.
3. You must withhold $35.90 plus 15% of excess over $525.
4. Subtract $525 from $622.10 to determine the excess, which is $97.10. Now, multiply $97.10 by 15%. Then, add that amount to the flat amount of $35.90.
$622.10 – $525 = $97.10
$97.10 X 0.15 = $14.57
$14.57 + $35.90 = $50.47
You withheld $50.47 each week from your employee’s wages, which is significantly more than what you would withhold in 2019.
Keeping up with changing tax rates can be challenging when you’re a busy business owner. With Patriot’s payroll for small business, you don’t need to worry about tracking changes. Our software is updated to reflect current tax rates. Start your self-guided demo today!
This article has been updated from its original publication date of 1/29/2018.
This is not intended as legal advice; for more information, please click here.