Published: Fri, January 12, 2018
World | By Melba Underwood

IRS releases new withholding tables

IRS releases new withholding tables

The report underscored Olson's repeated complaints that Congress is underfunding the agency, warning that the new tax law will bring added pressures that will further impair its ability to respond to taxpayers, update technology and maintain compliance programs.

Today, employers received new withholding guidance from Treasury and the Internal Revenue Service (IRS) in order to implement tax cuts and other provisions of the Tax Cuts and Jobs Act.

While employers can begin doing this voluntarily, they will have to comply with the new guidance by February 15. Employers should begin using the new withholding tables as soon as possible, but not later than February 15, according to the IRS notice issued Thursday.

Additionally, Treasury and the IRS will engage in a thorough and collaborative process to release a new W-4 for 2019 by the end of the year.

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. The guidelines go to employers and payroll processors, which will then adjust the amount of tax withheld from workers' paychecks.

According to the IRS, it generally takes companies about a month to integrate new withholding guidelines.

"These new tables will help deliver the tax cuts as soon as possible to as many Americans as possible, with as little disruption as possible", Mnuchin said at the White House press briefing.

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Wage earners with "simple tax situations", the senior IRS official said, should be able to correctly calculate their withholdings without any over or under payments.

Although the new calculator will be most helpful to taxpayers with complicated taxes, he urged everyone to use it.

That's on top of funding cuts that have already left the agency unable to keep up with many of its service demands, Nina Olson, the National Taxpayer Advocate, wrote in her office's annual report to Congress.

For people with simpler tax situations, the new tables are created to produce the correct amount of tax withholding. 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.

The IRS made clear that the new tables are created to produce the correct amount of tax withholding.

But it also eliminated a $4,050 personal exemption for each household member until 2026 and scaled back a popular deduction for state and local taxes. In all, the new legislation has increased the standard deduction, done away with personal exemptions and trimmed individual income tax rates.

Some businesses have already responded to those anticipated changes by granting bonuses and wage increases and by making or planning for additional investments.

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