Many employees will begin to see increases in their paychecks to reflect the new law in February.
22 signed the Tax Cuts and Jobs Act, and this sweeping reform of the USA federal tax system will mean significant tax cuts for most individuals, families, and businesses. Until a new Form W-4 is issued, employees and employers should continue to use the 2017 Form W-4.
Here's a question you'll be asking yourself in the coming weeks: Is my employer withholding too little or too much in taxes from my paycheck?
Democrats remain critical of the Republican-led tax bill and warn that the the new tax guidelines allow the Trump administration to deliver on the promise of a large middle-class tax cut ahead of the 2018 mid-term elections, but, in fact, will leave taxpayers owing inordinately larger tax bills in 2019. This is the first in a series of steps that IRS will take to help improve the accuracy of withholding following major changes made by the new tax law.
The Republican tax bill that Trump signed into law in December lowered individual tax rates through 2025 and almost doubled the standard deduction that families can use to reduce taxable income. And eligibility for the Child Tax Credit has been expanded.
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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.
The IRS will release an online calculator by the end of February so taxpayers can ensure their paychecks are accurate, Treasury Secretary Steven Mnuchin said during a White House press briefing Thursday. The first snafu related to taxpayer efforts to pre-pay 2018 property taxes before the cap on state and local tax deductions began on January 1.
This is a simplified analysis that doesn't account for pre-tax deductions of other provisions that affect many workers' take-home pay. The new law is complicated. As was documented by the media coverage, the tax bill was written nearly entirely in secret and major changes were being made even on the day of the Senate vote on the bill.
"The IRS will have its hands full in implementing the new law", Olson said.
Some businesses have already responded to those anticipated changes by granting bonuses and wage increases and by making or planning for additional investments. The IRS will work with the business and payroll community to encourage workers to file new Forms W-4 next year and share information on changes in the new tax law that impact withholding.
For many seniors, that will mean either lower quarterly tax payments to the IRS or income tax refunds when they file their 2018 taxes next year.