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DEDUCTIONS AND W-4S: EARLY 2018 RESPONSES TO TAX REFORM

The Tax Cuts and Jobs Act signed into law on December 22, 2017 is prompting some prudent early tax 2018 actions by both employers and employees related to employee benefits. Many employers are electing to make additional employer qualified plan contributions for the 2017 tax year when the employer’s tax rate may be higher and thereby yield a bigger tax benefit. C corporations, in particular, whose federal income tax rate in 2017 was as high as 35%, may find worthwhile to make further 2017 plan contributions, such as discretionary profit sharing contributions, if permitted under their 401(k) plans (up to the general defined contribution plan limit of 25% of compensation), rather than make the same contributions for 2018 when the company’s tax rate is a flat 21%.
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