What the new tax withholding tables mean for your take-home pay

12 January, 2018, 12:28 | Author: Brenda Erickson
  • Reuters

Most workers won't have to submit any tax forms to see a change in their withholding.

According to the IRS, it generally takes companies about a month to integrate new withholding guidelines. Employers and payroll companies will now be required to process and implement those changes.

The rollout is in fact effective immediately as employers on Thursday received new withholding guidance from the Treasury Department and the Internal Revenue Service.

The IRS will have to update its systems, publish new forms and publications, revise regulations, train employees on the new tax law and answer taxpayer questions about it.

The IRS will release an online calculator by the end of February so taxpayers can ensure their paychecks are accurate, Treasury Secretary Steven Mnuchin said during a White House press briefing Thursday.

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.

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The new guidelines incorporate lower tax rates that were central to the tax overhaul from Congress's December tax overhaul. 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. Underwithholding would lead to taxpayers owing more when they file their 2018 returns next year. A senior IRS official said he expected that level to fall just a bit next year to around 73 percent.

Two congressional Democrats have expressed concern that the new tables would "systematically underwithhold income taxes during the 2018 tax year". Personal exemptions are a core feature of the current withholding system, but now that they are eliminated, "it's necessary to build a new approach to withholding, which will take some time", the senior IRS official said.

"Republicans are using brute force and speed to implement a law that will deliver a financial blow to hardworking Americans all across the country", Sen.

Senior IRS and Treasury Department officials told reporters Thursday that they would be encouraging all Americans to proactively use a new IRS tax calculator in late February to help them determine whether their paychecks are accurate. President Donald Trump and the Republican architects of the tax plan have deflected criticism of the unpopular legislation, insisting at every turn that Americans will come to love the new law when they see their heftier paychecks next month - with less money withheld in anticipation of lower income taxes. Ron Wyden, the top Democrat on the Senate Finance Committee, said in a statement.

"I don't want to speculate on what people will do", Mnuchin said Thursday.

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