Your paycheck may be going up soon because of tax cuts

FILE - In this Jan. 14, 2017 file photo, tax professional and tax preparation firm owner Alicia Utley reaches for hard copies of tax forms while working to stay caught up at the start of the tax season rush in her offices at Infinite Tax Solutions, in Boulder, Colo. Millions of working Americans should start seeing fatter paychecks as early as next month, the IRS says, as a result of the recently passed tax law. (AP Photo/Brennan Linsley)

WASHINGTON — Millions of working Americans should start seeing fatter paychecks as early as next month, Republican leaders say, as a result of the recently passed tax law.

But the precise timing hasn't been fixed yet. And some employees should be aware that less money withheld doesn't necessarily mean that their tax burden will shrink next year.

The massive Republican tax legislation, signed into law last month by President Donald Trump, kicked in Jan. 1. Billed as a huge benefit for the stressed middle class, it brings the biggest overhaul of the U.S. tax code in three decades, reaching into every corner of American society and the economy. The $1.5 trillion package provides generous tax cuts for corporations and the wealthiest Americans, and more modest reductions for middle- and low-income individuals and families.

A look at how working taxpayers could be affected:



That was the promise from the Republican architects of the tax plan. Deflecting criticism of the deeply unpopular legislation, they insisted Americans will come to love the new tax law when they see their heftier paychecks this year — with less money withheld in anticipation of lower income taxes.

"In February, look at your paychecks, because you'll see the tax relief we delivered," said Rep. Kevin Brady, head of the tax-writing House Ways and Means Committee.

The Internal Revenue Service says employees could see "changes" in their paychecks as early as February. The agency first has to issue the new withholding tables for employers, reflecting the changes in tax rates for different income levels under the new law. That's expected to happen sometime this month to give companies and payroll service providers — and their computer systems — time to adjust. Such a massive, universal change feels something like turning around an aircraft carrier.

In the meantime, the pre-Jan. 1 tax rates and withholding amounts will continue to apply.



The IRS is "overwhelmed" by the changes in the complex new law and now is trying to get out the most important information first, said Melissa Labant, director of tax policy and advocacy at the American Institute of Certified Public Accountants.

"The withholding tables are at the top or near the top of the list of priorities," she said.

She asks employees to be patient. One thing they can do: Consider updating their Form W-4 "employee's withholding allowing certificate," filed with their company, to make sure their information is up to date. Labant advises that should only be done, though, after the IRS updates the Form W-4 — also timing unknown.

Taxpayers can also use the form to request that their employer withhold additional taxes. That may make sense if, for example, they have substantial outside income such as interest, dividends or capital gains on the sale of assets or investments.



The tax cuts for corporations under the new law are permanent, while those for individuals and families expire in 2026.

Nonpartisan tax experts project that the law will bring lower taxes for the great majority of Americans, though not all.

But reduced tax rates don't necessarily mean a lower tax bill for 2018. The new law is complicated. There are significant limitations on long-cherished deductions, such as the federal deduction for state income, property and sales taxes. There are new tax credits but other mainstays — like the $4,050 personal exemption — are gone. The standard deduction is doubled, to $24,000 for couples, but that means it no longer makes sense for many people to itemize and claim other deductions.

That also means employees can't assume that the new, lower withholding rates will cover everything they owe Uncle Sam for this year.



Taxpayers won't file their 2018 returns until next year, in accordance with normal procedure. That's too late for taxpayers to have refunds in hand, or checks paid to the IRS, under the new law before they vote in the midterm elections this November. Trump and the Republicans are counting on the tax law to give them a boost in the elections.

Must Read

California lawmakers approve extension of climate...

Aug 25, 2016

California lawmakers have approved a 10-year extension of the state's landmark climate change law

Europe hits Apple with a $15 billion-plus tax bill

Aug 30, 2016

The European Union has ordered Apple to pay nearly $15 billion in back taxes to Ireland, plus...

Apple says several billion dollars set aside for...

Sep 1, 2016

Apple's chief executive says the company has put aside "several billion dollars" to pay tax...

Global stocks drift amid US economy worries

Sep 7, 2016

World stock markets meandered Wednesday after a weak report on U.S. service companies added to...

ECB inaction weighs on European stocks but boosts...

Sep 8, 2016

European stock markets dipped Thursday while the euro struck two-week highs against the dollar...

People also read these

Stocks end mostly lower after Yellen speech

Aug 26, 2016

Stocks end mostly lower, giving up earlier gains after Fed Chair Yellen said the case for raising...

Iowa at center of debate over 'shadow insurance'...

Aug 30, 2016

Life insurance companies are setting up "shadow insurers" to take on some of their liabilities and...

WHY IT MATTERS: The Role of Government

Aug 31, 2016

It's the Goldilocks conundrum of American politics: Is the government too big, too small or just...

Low taxes at dozens of firms in spotlight after...

Sep 6, 2016

After tax ruling against Apple, spotlight turns to dozens of companies that have boosted earnings...

Handymen, home care helps seniors trying to age...

Sep 7, 2016

Study shows mix of home fix-ups and visits from occupational therapists and nurses improved...

About Us

The World Insiders brings you exclusive coverage from across the globe in a timely, easy to consume format sourced directly from our regional media partners.

Contact us:

Subscribe Now!