Treasury: 90% of wage earners will likely see higher take-home pay

Frederick Owens
January 12, 2018

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.

As a result, Americans are being encouraged to check their payroll using the IRS online calculator, which will not be available until next month, to make sure that they are not overpaying or underpaying their taxes. Trump said lower taxes and deregulation will rev up the rural economy in a partisan speech geared toward a much broader audience than the farmers gathered to hear him.

The move should translate into more take-home pay for about 90 percent of American workers, Treasury Secretary Steven Mnuchin said in a statement.

Senator Ron Wyden of OR and Representative Richard E. Neal of MA, the top Democrats on the Senate and House tax writing committees, sent a letter to the Government Accountability Office asking it to analyze the 2018 withholding tables and determine whether they will result in "systematic under-withholding".

Another reason additional funds are needed is that although the tax bill was originally promoted as a simplification of the code, new complications have been added in some cases, including exemptions for most refinancings of home mortgages and loans closed after December 15 that had prior binding purchase contracts.

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The major changes affecting individuals include new tax brackets, (mostly) lower income tax rates, a near-doubling of the standard deduction and the elimination of both personal exemptions as well as many itemized deductions.

"The Administration's monumental tax reform legislation continues to provide economic benefits for hard-working Americans".

Most workers won't have to submit any tax forms to see a change in their withholding. The tax code now limits the deduction for state and local taxes to $10,000. Employers and payroll companies will now be required to process and implement those changes.

Senior IRS and Treasury Department officials told reporters Thursday that they would be encouraging all Americans to proactively use a new IRS tax calculator in late February to help them determine if their paychecks are accurate. Personal exemptions are a core feature of the current withholding system, but now that they are eliminated, "it's necessary to build a new approach to withholding, which will take some time", the senior IRS official said. If they determine they are paying too much or too little in taxes, based on the size of their family or other variables, they can direct their employer to make changes.

These tax changes are all scheduled to expire after 2025, though Republicans have said they want to make them permanent.

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