IRS to Employees: Check the Math!
On December 22, President Donald Trump signed into law The Tax Cuts and Jobs Act before heading off to Mar-a-Lago in Florida for the Christmas break. As National Public Radio host Ray Suarez pointed out on All Things Consideredlast month, Republicans predict the new tax law will create lots of jobs, but there’s also no question it’s going to create plenty of work for the Internal Revenue Service, which is going to have to “interpret and implement [the rules] at a time when it’s strapped for cash.”
Further, the new tax law creates a new wrinkle for employees, who need to make sure their employers are withholding the appropriate amount of pay. (After all, who wants to give Uncle Sam an interest-free loan, right?)
To that end, the IRS released last Thursday Notice 1036, which updates the income-tax withholding tables for 2018. Employers were told they should begin using the tables as soon as possible, but no later than Feb. 15, 2018.
To help people determine their withholding, the IRS also announced it was revising the withholding tax calculator on IRS.gov. The agency anticipates this calculator should be available by the end of February.
Once the new calculator goes live, the IRS encourages employees to use it to ensure the appropriate amount is being withheld from their paychecks.
In a Washington Post story posted on Thursday, a senior IRS official is quoted saying: “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.”
According to the IRS, further changes involving withholding will likely be needed in 2019.
Tax calculators have obviously been around for a while, available on various tax-preparer websites and elsewhere. But this is the first time employees are going have to use it in such a big way, says Bill Dunn, director of government relations for the American Payroll Association.