Published: Fri, January 12, 2018
Worldwide | By Gretchen Simon

How Tax Reform Will Put More Money in Your Wallet This Year

How Tax Reform Will Put More Money in Your Wallet This Year

Because most workers have taxes withheld from their paychecks, these tax changes could have a big impact on take-home pay and household budgets.

The new withholding tables are created to work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances.

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.

Mnuchin also mentioned that the IRS will have a new calculator on its website by the end of February so that taxpayers can figure out how the change will affect them.

Steven Mnuchin, the Treasury secretary, said on Thursday that 90 percent of wage earners would see an increase in their take-home pay once businesses change their withholding tables to reflect the new tax code.

The IRS will have to update its systems, publish new forms and publications, revise regulations, train employees on the new tax law and answer taxpayer questions about it.

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Wood did not respond to an email from The Associated Press seeking comment and did not answer his cellphone. He added that the company takes pride in working with individuals who represent the values he mentioned.

If taxpayers have too little withheld this year, they could be hit with a surprise tax bill next year - with possible interest and penalties. Washington is encouraging employers to implement the new withholding tables as soon as possible, but no later than February 15. ‎We anticipate issuing the initial withholding guidance (Notice 1036) in January reflecting the new legislation, which would allow taxpayers to begin seeing the benefits of the change as early as February.

Sen. Orrin Hatch also played a key role in creating confusion in the new tax laws from his role as chairman of the powerful Finance Committee, the tax writing committee in the Senate. Currently, however, the IRS has instructed employers to continue using the old, 2017 withholding tables.

The chairman has the ability to direct the oversight efforts to areas of particular importance, and prior chairmen attempted to help address longstanding IRS concerns such as outdated computer systems as well as more recent challenges such hackers gaining access to individual refunds.

Yahoo Finance ran the numbers and found a net drop in tax withheld in each of 11 income categories we examined. The new table will posted on IRS.gov.

Mnuchin threw cold water Thursday on a proposal floated by two such states - California and New Jersey - to get around the $10,000 limit on deducting state and local taxes from federal income. "And we're going to actively encourage and make sure that taxpayers understand how to go on to the calculator, once it's up and running".

The IRS made clear that the new tables are created to produce the correct amount of tax withholding. Treasury would achieve that, the lawmakers surmised in the letter, by pushing the IRS to change its formula for withholdings. There are new tax credits while other mainstays - like the $4,050 personal exemption - are gone.

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