They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables. Workers will see changes in their February paychecks once employers adopt the new guidance.
The withholding tables and guidance it puts out will be created to work with existing W-4s that employees have already filed, the agency said. Some experts worry that mistakes by the IRS or employers could lead some taxpayers to underpay in 2018 and end up with too little taken out of their checks in 2018 to cover their total tax bill. Employees do not have to do anything at this time. The IRS will be working closely with the nation's payroll and tax professional community during this process.
What's more, private contractors in some cases were paid 25percent commissions on collections that the IRS made without their help, according to the annual report by Nina Olson, who heads the Taxpayer Advocate Service, an independent office within the IRS.
Although Olson said the impact of the new law was still being calculated, preliminary estimates said the IRS would need an additional $495 million both this year and next in order to implement the sweeping changes.
The Trump administration, which has promised that the new tax law will put money back in workers' pockets, is eager to ensure that the transition to a new tax code does not devolve into chaos and to show evidence that taxpayers are faring better under the new law.
The new withholding calculator - expected out in late February - will assist individuals with more complicated situations to fine-tune their withholding calculations, he explained.
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The IRS made clear that the new tables are created to produce the correct amount of tax withholding.
Yahoo Finance ran the numbers and found a net drop in tax withheld in each of 11 income categories we examined.
Federal officials said that while the IRS will begin accepting both electronic and paper tax returns January 29, paper returns will begin processing later in mid-February as system updates continue in the aftermath of the recently approved federal tax bill. Taxpayers are encouraged to use the calculator to adjust their withholding once it is released.
Tax reform was sorely needed, but we should also strive for agency accountability to give the taxpayers the most bang for their bucks also. In all, the new legislation has increased the standard deduction, done away with personal exemptions and trimmed individual income tax rates. The effort will be created to help workers ensure that they are not having too much or too little withholding taken out of their pay.
In the final phase, the IRS later this year will likely make further changes that will be effective 2019.
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.