IRS rolls out new tax tables for promised bigger paychecks; year-end tax bills remain to be seen

Composite stock image, St. George News

DISTRICT OF COLUMBIA (AP) — Taking the first concrete step toward the Republican tax plan’s promise of bigger paychecks for millions, the Trump administration issued new guidelines Thursday for how much employers should withhold as taxes from workers’ pay.

The Internal Revenue Service published the new income-tax withholding tables to conform to the sweeping $1.5 trillion tax overhaul, the first major rewrite of the tax code in three decades, which became law last month and took effect Jan 1.

The new law provides steep tax cuts for corporations and wealthy Americans while offering more modest reductions for most low- and middle-income families and individuals.

Read more: It’s a done deal: Congress wraps up massive tax package

Businesses across the country must adopt the changes by Feb. 15. That means employees could start seeing the changes reflected in their paychecks next month, the IRS said.

President Donald Trump and the Republican architects of the tax plan – including Utah Sen. Orrin Hatch, Senate Finance Committee Chairman – 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.

Read more: Senators consider automatic tax hikes if estimated revenue falls short; Hatch optimistic about tax plan effort

Trump and the Republicans are counting on the tax-cut law, the first significant legislative achievement of his presidency, to ensure the GOP retains its majorities in Congress in this year’s elections.

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 move should translate into more take-home pay for about 90 percent of American workers, Treasury Secretary Steven Mnuchin said in a statement.

Individual taxpayers aren’t required to make any changes to their Form W-4 right now. But the IRS expects that many taxpayers will have to do so later this year, when the agency releases a revised version of the form.

The IRS also plans to release a new tax withholding calculator on its website late next month to help individual taxpayers determine the correct amount of withholding.

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

Reduced tax rates don’t necessarily mean a lower tax bill for 2018; the new law is complicated. There are significant limitations on long-cherished deductions, such as the federal deduction for state income, property and sales taxes.

There are new tax credits, while other mainstays – like the $4,050 personal exemption – are gone. The standard deduction is doubled, to $24,000 for couples, but that means it no longer makes sense for many people to itemize and claim other deductions.

That also means employees can’t assume that the new, lower withholding rates will cover everything they owe Uncle Sam for this year. Taxpayers won’t file their 2018 returns until next year, following normal procedure.

Written by MARCY GORDON in Washington and ALEX VIEGA in Los Angeles


Twitter: @STGnews

Copyright 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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  • bikeandfish January 16, 2018 at 2:03 pm

    The uncertainty is rough for those of us making important financial decisions. It sounds like we, my wife and I in the lower middleclass brackets, will benefit for a couple years then actually see a tax increase. Hard to know given the complexity of tax law. But we’ll take a reduced tax bill while it lasts given we have little control over the law in general. The reality in the long run though is not favorable to those of us clinging to barely sustainable middleclass incomes. If this country doesn’t do something soon we will see a cohort of us drop to lower class status for no fault of our own (stagnant wages with increasing cost of living and inflation).

  • jh9000 January 16, 2018 at 3:08 pm

    Enjoy a few extra bucks each month for a couple years. After that, you get to pay more. And your kids get stuck with an extra $1.5T in debt that’ll be sold to the Chinese. Not sure how these “conservatives” aren’t run out of Washington for this.

    • dons8120 January 16, 2018 at 4:35 pm

      It’s because the people who are voting for them won’t be around long enough to see the downside. We need young people to vote more.

      • bikeandfish January 16, 2018 at 5:03 pm

        We do but we vote on candidates for so many diverse reasons that we often get stuck with a package deal that includes items we disagree about. From data I have seen Millennials are actually pretty motivated voters but until we get candidates that reflect the values of our changing demographics it has a diluted effect.

        • jaybird January 16, 2018 at 8:23 pm

          So agree, but voting still can make a difference when you get involved and mandate candidates for your demographic. We are going to need every penny because our state and local taxes are rising, costs are going up too. So while they gave us a bit, they take away a lot. Its BS to give so much to the wealthy.

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