By Jeff Stein
The Washington Post
The Internal Revenue Service released a new tool Wednesday designed to help millions of Americans ensure they’re not dramatically underpaying or overpaying their taxes under the new Republican tax law.
The online calculator allows taxpayers to compare how much their employer is withholding for taxes on their pay stub to a government projection of how much should be withheld. The tool makes that calculation based on income, household size, and other variables.
The move is aimed at giving workers a chance to make sure their employers are withholding the correct amount, and then to prod their bosses if the numbers don’t line up.
“This is really about creating a tool for American taxpayrs to check their withholdings … I dont think the majority of Americans need to do anything …”
“What the IRS is trying to do is to say to people, ‘Here is the new law: are you sure your withholding choices are still right?,'” said Mark Mazur, a tax expert at the nonpartisan Tax Policy Center who served in the Treasury Department under President Barack Obama. “The IRS does not want people to get to April and have a surprise where they realize they owe more than they thought, or that they could have had more money in their paycheck. You don’t want big surprises.”
The Republican tax law passed at the end of 2017 ushered in sweeping changes to the American tax code, lowering tax rates for millions of families and business, doubling the most common (or “standard”) deduction claimed by many middle-income taxpayers, and eliminating or capping deductions and other tax breaks claimed by millions of workers.
Businesses are trying to match their employees’ planned federal tax payments with what they will pay under new system, creating the need for the online calculator.
The new withholding tables may also prove one of the Republican Party’s best shots at demonstrating to the American public that the tax law is bolstering their paychecks before November’s 2018 midterm elections determine control of Congress. Americans won’t file taxes under the new code until next spring, well beyond this fall’s elections, but the withholding tables give them an opportunity to point to existing changes in take-home pay.
“People will not know exactly how it shakes out for them until they file approximately around a year from now, but take-home pay amounts show up right now,” said Leandra Lederman, a tax expert at Indiana University.
In January, businesses across the country started using new estimates released by the IRS designed to account for the new changes. Americans who have straightforward tax filings and do not claim many specialized deductions on their tax forms – the majority of the country – should have a relatively easy time gauging what they owe the federal government under the new tax code, according to Mazur.
But millions of those with more complicated tax situations – particularly those who itemize their tax deductions, or claim a set of specialized tax breaks rather than taking what’s known as the “standard deduction” — face a maze of changes that could be hard to game out under the new law. And that could lead to some unwelcome gaps between what Americans think they’ll be paying and their tax realities.
“Most people have been seeing bigger paychecks, without them being tailored to their own individual tax situations. That’s a big part of the concern,” Lederman said. “People will be dismayed if it gets to tax time and they find out they unexpectedly owe, rather than getting a refund.”
Republicans have said that the law, which centered on a massive corporate tax cut and temporary tax relief for most Americans, will spur widespread economic growth and business investments. But Democrats have maintained that its relief for most workers is negligible and will do little to boost wages.
When new withholding tables were rolled out, Republicans touted stories of more robust pay for workers under the new tax plan. Experts are still unsure how true that is.
The amount of taxpayer savings will vary widely by incomes and state of residence, with a report by the Joint Committee on Taxation, Congress’s official scorekeeper, finding that only 44 percent of the country will get a tax reduction of more than $500.
“For the majority of Americans, the tax cuts just aren’t that large,” said David Gamage, a tax expert at Indiana University. “I’m skeptical of the notion that a large number of people will actually notice the small difference in take-home pay and be able to figure out how much of that is due to the tax law.”
Go to Source
Powered by WPeMatico