Generally, employees may claim exemption from federal income tax withholding because they had no federal income tax liability last year and expect none this year. To continue to be exempt from withholding from one year to the next year, employees must provide a new Form W-4, Employee’s Withholding Allowance Certificate, by February 15 of the subsequent year. For 2018, the IRS has extended this deadline until February 28, 2018 [IRS Notice 2018-14, 2018-7 IRB 353]. Because the 2018 Form W-4 may not be available before February 28, employees may claim exemption from withholding for 2018 using the 2017 Form W-4. The 2017 Form W-4 may be used until 30 days after the new 2018 Form W-4 is released.
To use the 2017 Form W-4 to claim exemption from withholding in 2018 (whether renewing a claim from 2017 or making a new claim), the form must be:
- Edited by striking “2017” in the text on Line 7, entering “2018” in its place, and signing the form in 2018;
- Modified by entering “Exempt 2018” on Line 7 and signing the form in 2018; or
- Not edited but signed in 2018 and submitted under procedures established by the employer for the employee to certify entitlement to exempt status for 2018 by using the 2017 Form W-4 to claim exemption from withholding for 2018.
The employee can use any substantially similar method that clearly conveys in writing the employee’s intent to certify an exemption from withholding for 2018. Employers with established electronic systems for furnishing withholding allowance certificates may change their electronic systems to conform with these options.
Employees who claim exemption from withholding for 2018 using the 2017 Form W-4 do not need to furnish a 2018 Form W-4 after the 2018 Form W-4 is released.
Become an APA member and get more in-depth information from the Payroll Currently article, “IRS Releases 2018 Publication 15 (Circular E) With Form W-4 Guidance."
