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

12 January, 2018, 06:25 | Author: Marjorie Miles
  • New report says IRS paid $20 million to private debt collectors to recoup $6.7 million

What's more, a lot of features from the old tax code that affected how many allowances you claimed on your W-4 have been changed.

Republicans have promised that American wage earners will see bumps in their paychecks starting in February - after employers have made the withholding adjustments.

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. Congress provided $11.2 billion for the IRS in fiscal 2017, and the agency is now operating at the same funding level because lawmakers have yet to agree on new appropriations for fiscal 2018.

Even though the new tables are out, the time it takes for employees to see the change reflected in their paychecks will vary.

As President Donald Trump's recent tax overhaul is rushed into law, with businesses expected to make the necessary payroll adjustments by February 15, the Treasury Department is requiring employers to use old forms applicable to the old tax system, known as W-4s, in calculating how much to withhold in taxes from employees' paychecks.

The doubling of the child tax credit, from $1,000 to $2,000, along with a higher phase-out level and a higher threshold for the refundable portion will translate to less tax withholding for workers with children.

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.

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Although Olson said the impact of the new law was still being calculated, preliminary estimates said the IRS would need an additional $495 million both this year and next in order to implement the sweeping changes. In all, the new legislation has increased the standard deduction, done away with personal exemptions and trimmed individual income tax rates.

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.

For example, the GOP tax bill lowered a cap on the mortgage interest deduction from $1 million to $750,000, for debt incurred after December 15, 2017, with certain exceptions.

"In the weeks ahead, the IRS will be providing more information to help people understand and review these changes".

This is a simplified analysis that doesn't account for pre-tax deductions of other provisions that affect many workers' take-home pay.

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. For most, that will be a positive change, meaning a lower total tax bill.

Flaws in the new process, the report said, can undermine public trust in the charitable sector. Treasury would achieve that, the lawmakers surmised in the letter, by pushing the IRS to change its formula for withholdings. Consequently, tax refunds for 2018 (which will come in 2019 after workers file their 2018 taxes) will likely be larger than in future years when the correct withholding tables apply for the entire year.



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