The Internal Revenue Service released information today to help taxpayers understand the new income-tax withholdings and changes made by the tax reform legislation enacted last month.
The new tables are designed not only to best approximate the change in workers' tax liability under the new law, but to do so in a way that "delivers benefits as soon as possible to as many people as possible with as little disruption as possible", a senior Treasury official told reporters. "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". "These tax cuts will ensure that American workers are able to keep more of their hard earned income and decide how to spend, invest or save it". Trump administration officials said that the new guidelines should lead to bigger paychecks for 90 percent of all wage earners.
The patchwork system is part of a rushed transition the White House is trying to push through to allow as many Americans as possible to see bigger paychecks next month.
The new guidelines adjust how much income tax must be taken out from employee paychecks after taking into account exemptions claimed by employees on their IRS Form W-4, filed with their employers to help determine withholding. The IRS emphasizes this information will be created to work with the existing Forms W-4 that employees have already filed, and no further action by taxpayers is needed at this time.
Senator Ron Wyden of OR and Representative Richard E. Neal of MA, the top Democrats on the Senate and House tax writing committees, sent a letter to the Government Accountability Office asking it to analyze the 2018 withholding tables and determine whether they will result in "systematic under-withholding". The tax code now limits the deduction for state and local taxes to $10,000.
Nonpartisan tax experts project that the law will bring lower taxes for the great majority of Americans, though not all. The online calculator will not be available until sometime next month. Employers and payroll companies will now be required to process and implement those changes.
There are new tax credits while other mainstays - like the $4,050 personal exemption - are gone. We anticipate issuing the initial withholding guidance in January, and employers and payroll service providers will be encouraged to implement the changes in February.
And roughly three-quarters of tax filers are overwithheld because they take too few allowances.
"I don't want to speculate on what people will do", Mnuchin said Thursday.
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