Tax reform: IRS, Treasury take first step toward raising your paycheck

  • Tax reform: IRS, Treasury take first step toward raising your paycheck

Tax reform: IRS, Treasury take first step toward raising your paycheck

The law lowers tax rates, which is the primary reason Americans will see bigger paychecks next month, but it also limits or scales back tax deductions, changes that might not be realized until Americans file their tax returns. The IRS doesn't expect that to change much under the new tax law given the preference filers have shown for getting big refunds, rather than just breaking even or having to cut a new check to Uncle Sam when they file their returns. Employers will have until February 15 to incorporate the changes in their payroll systems.

Wyden and Neal, the top Democrats on the tax-writing Senate Finance Committee and House of Representatives Ways and Means Committee, asked that the watchdog Government Accountability Office review new Internal Revenue Service withholding tables to "assure Congress and the American public that there is no political influence".

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.

Change to take-home pay will be reflected in February paychecks once employers adopt the new guidance. 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. Then that person files their tax return by the following April, and if their tax payments were too high or too low, they must account for the difference through a refund or payment.

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Democrats remain critical of the Republican-led tax bill and warn that the the new tax guidelines allow the Trump administration to deliver on the promise of a large middle-class tax cut ahead of the 2018 mid-term elections, but, in fact, will leave taxpayers owing inordinately larger tax bills in 2019. Washington is encouraging employers to implement the new withholding tables as soon as possible, but no later than February 15. If they determine they are paying too much or too little in taxes, based on the size of their family or other variables, they can direct their employer to make changes. Ron Wyden of OR and Rep. Richard Neal of MA.

Steven Mnuchin, the Treasury secretary, said on Thursday that 90 percent of wage earners would see an increase in their take-home pay once businesses change their withholding tables to reflect the new tax code.

Nonpartisan tax experts project that the law will bring lower taxes for the great majority of Americans, though not all.

But that will be partially offset by new curbs on numerous tax breaks, including the elimination of personal exemptions and the new cap on state and local taxes.