New tax guidelines rely on workers to double-check their paychecks

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The Treasury Department and IRS are designing new W-4 forms that millions of Americans will probably be able to fill out later this year to make their tax withholdings more accurate in the future, but they will not be ready in time for the paycheck adjustments next month.

The Republican tax law has created massive new obligations for an Internal Revenue Service already struggling "to perform the basic tasks of administering the tax system" because of recent budget cuts, according an internal agency report released Wednesday.

The IRS is encouraging employers to implement the new withholding tables by February 15. The IRS doesn't expect that to change much under the new tax law given the preference filers have shown for getting big refunds, rather than just breaking even or having to cut a new check to Uncle Sam when they file their returns. "We estimate that 90 percent of wage earners will experience an increase in their take home pay", said U.S. Treasury Secretary Steven T. Mnuchin. The White House said Thursday that businesses should make these adjustments by February 15, part of the administration's push for millions of workers to see bigger paychecks as quickly as possible. Specifically, the withholding tables released today are created to work with the Forms W-4 that workers have already filed with their employers. ‎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.

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"We had an existing form", Mnuchin said. "Our objective is not to have taxpayers over-withhold so they owe money at the end of the year".

For the most part, the new tax law affects income earned in 2018, and the returns taxpayers must file this year deal with income earned in 2017, under the old tax rules.

Republicans have said their tax law will streamline and simplify the USA tax code, in part by increasing the number of Americans who claim the standard deduction on their income taxes.

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While companies and workers try to figure out the new tax landscape, states are trying to mitigate some of the tax hits in the law.

The IRS also plans to update the withholding calculator on its website, so that taxpayers can see if they want to update their withholdings.

Earlier this week, Wyden and Rep. Richard Neal, the top Democrat on the House tax-writing committee, asked the Government Accountability Office to analyze the new IRS tables to see if they might lead to systematic underwithholding of federal taxes from paychecks. Taxpayers who do not immediately receive larger paychecks will still benefit from the tax cuts at the end of the year, once they file their tax returns. The process will include seeking input from employers and payroll providers on how best to design a new W-4 to reflect an updated tax system based on the new law.

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