Taking the first concrete step toward the Republican tax plan's promise of fatter paychecks for millions, the Trump administration on Thursday issued new guidelines for how much employers should withhold as taxes from workers' pay.
The U.S. Treasury and the IRS on Thursday put out new guidance and withholding tables for employers that incorporate changes from the new tax law. "We've constructed the tables so that most people should be accurately withheld if they leave their W-4 in place", an IRS official noted on Friday. That means employees could start seeing the changes reflected in their paychecks next month, the IRS said. Ron Wyden of OR and Rep. Richard Neal of MA, both Democrats, said in a letter to acting IRS Commissioner David Kautter.
The IRS also plans to release a new tax withholding calculator on its website late next month to help individual taxpayers determine the correct amount of withholding. The new law provides steep tax cuts for corporations and wealthy Americans while offering more modest reductions for most low- and middle-income families and individuals. "Payroll withholding can be complicated, and the needs of taxpayers vary based on their personal financial situation". The new tax law changed tax rates and eliminated personal exemptions, which had been the basis of withholding allowances. "Taxpayers can not make these changes until the revised Form W-4 is published, which the IRS has announced will be forthcoming in the coming months". The IRS anticipates this calculator should be available by the end of February. "And we're going to actively encourage and make sure that taxpayers understand how to go on to the calculator, once it's up and running".
Most people fill out their W-4 form when they're hired at a new job and don't change it unless they get married, have kids, get divorced or experience other life-changing situations.
"I look forward to GAO's independent review of these tables, which will expose whether the Trump administration is tampering with Americans' paychecks, resulting in a whopping tax bill next year", Wyden said.
"I look forward to GAO's independent review of these tables, which will expose whether the Trump administration is tampering with Americans' paychecks, resulting in a whopping tax bill next year", Wyden said in a January 11 news release. Treasury would achieve that, the lawmakers surmised in the letter, by pushing the IRS to change its formula for withholdings.