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

12 January, 2018, 06:26 | Author: Bert Pena
  • IRS Sign FBN

Another reason additional funds are needed is that although the tax bill was originally promoted as a simplification of the code, new complications have been added in some cases, including exemptions for most refinancings of home mortgages and loans closed after December 15 that had prior binding purchase contracts. The IRS is revising the Form W-4, however, until the new Form W-4 is issued, employees and employers should continue to use the 2017 Form W-4.

In the meantime, he urged filers who have complicated tax situations - i.e., anyone who is not single, childless and holding down just one job - to review the number of allowances they now take on their W4s once the IRS puts out its new withholding calculator by the end of February. This will minimize burden on taxpayers and employers.

As President Donald Trump's recent tax overhaul is rushed into law, with businesses expected to make the necessary payroll adjustments by February 15, the Treasury Department is requiring employers to use old forms applicable to the old tax system, known as W-4s, in calculating how much to withhold in taxes from employees' paychecks.

Additional funds are also required for programming and system updates, training employees, creating new tax forms, as well as for changing regulations and guidance, she said.

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

Companies have been awaiting details from the IRS following the sweeping tax overhaul passed at the end of last month that changes tax rates and brackets, increases the standard deduction and repeals personal exemptions. There are new tax credits while other mainstays - like the $4,050 personal exemption - are gone.

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Treasury Secretary Steven Mnuchin said the government expects about 90 percent of workers to see an increase in their take-home pay.

Many retirees will, however, experience a change in their total tax bill. As was documented by the media coverage, the tax bill was written nearly entirely in secret and major changes were being made even on the day of the Senate vote on the bill.

They are asking the Government Accountability Office to review the revised withholding tables and determine whether they protect millions of taxpayers from being surprised during the 2019 filing season.

The report says that IRS funding has fallen about 20 percent in inflation-adjusted terms since 2010.

On the other hand, "if the IRS tells employers to use current W-4s but ignore the number of allowances claimed and reduce that number to zero, there will be a lot of overwithholding, thus reducing many employees' net pay".

Deductions aren't automatically taken into account when employers set the amount of federal tax withheld from paychecks, which is why some workers ask their companies to withhold more or less than the recommended amount, which they're still allowed to do. Treasury would achieve that, the lawmakers surmised in the letter, by pushing the IRS to change its formula for withholdings.

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