The new tax reform law could put more money in your wallet soon. According to a new report, the U.S. Treasury estimates that 90% of American paycheck recipients will likely see more take-home pay as soon as February, due to the tax changes.
The Treasury and the IRS put out new guidance and withholding tables for employers on Thursday, which incorporate changes from the new tax law. As employers have until Feb. 15 to implement the changes, a report by CNN Money says that under the revised tables, 90% of paycheck earners will see a change in their checks, possibly by next month.
From the report:
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 new tables are designed not only to best approximate the change in workers’ tax liability under the new law, but to do so in a way that “delivers benefits as soon as possible to as many people as possible with as little disruption as possible,” a senior Treasury official told reporters.
The IRS is not issuing new Form W-4s … yet. “We’ve constructed the tables so that most people should be accurately withheld if they leave their W-4 in place,” a senior IRS official noted.
The plan is to have new W-4s by 2019. 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.
In the meantime, he urged filers who have complicated tax situations — i.e., anyone who is not single, childless and holding down just one job — to review the number of allowances they currently take on their W4s once the IRS puts out its new withholding calculator by the end of February.
Still, the report warns, taxpayers will need to assess whether their withholdings will be adequate, so that taxpayers aren’t left with a Federal tax bill at the end of the year.