Millions of Americans will need to use a new Internal Revenue Service online calculator to ensure their new paychecks are accurate, Trump administration officials said Thursday as they issued guidelines for implementing the recently passed tax law.
The guidelines are necessary for businesses to calculate how much to withhold in taxes from employees’ paychecks beginning as soon as next month. The White House said Thursday that businesses should make these adjustments by Feb. 15, part of the administration’s push for millions of workers to see bigger paychecks as quickly as possible.
In rushing the process, the Treasury Department is asking companies to rely on outdated forms to help determine how much to withhold.
A senior IRS official said Thursday that Americans with simple tax situations are likely to get accurate paychecks next month. But many Americans, including those who tend to itemize their tax returns, will need to use the online tool to ensure they are not dramatically overpaying or underpaying their taxes. The online calculator will not be available until sometime next month.
If they find their paychecks are inaccurate, it will be incumbent on the employees to tell their employers to make corrections.
“This will provide [Americans] with certainty so they are neither over-withheld or under-withheld,” Treasury Secretary Steven Mnuchin said Thursday.
The new guidelines incorporate lower tax rates that were central to Congress’s December tax overhaul. Trump administration officials said that the guidelines should lead to bigger paychecks for 90 percent of all wage earners.
But these tax withholding decisions are based on tax forms Americans file with their employers, known as W-4s, that were written to apply to an outdated tax system. The Treasury Department and IRS are designing new W-4 forms that millions of Americans will probably be able to fill out later this year to make their tax withholdings more accurate in the future, but they will not be ready in time for the paycheck adjustments next month.
“We had an existing form,” Mnuchin said. “We had existing technology. We had to figure out how to fit this in this format.”
Senior Treasury Department officials said they expect employers to update their systems so that the new withholding tables go into effect by Feb. 15.
Americans typically have federal income taxes withheld from their paychecks, money that is aggregated over the course of the year to account for a person’s federal tax liability. When they file their tax returns, if their tax payments were too high or too low, they must account for the difference through a refund or payment. Currently, 76 percent of Americans who file their taxes receive a tax refund. A senior IRS official said he expected that level to fall just a bit next year to around 73 percent.
But Democrats have alleged the number could fall much more, accusing the White House of changing the tax tables in a way that will lead to Americans dramatically under-withholding their tax payments during the year, only to be hit with big tax bills next year. They have ordered a review by the …read more
Source:: The Denver Post – News