New IRS Federal Tax-Withholding Guidelines May Give Millions Higher Paychecks
According to the new income-tax withholding tables released by the US Treasury Department, approximately 90% of American workers should see a decrease in their income-tax withholding. Once the new guidelines are implemented, this should result in more take-home pay.
The new withholding tables are available now, but employers are not required to comply until February 15, 2018. Some workers may see changes in their paycheck as early as this month, while others may not see changes until after the deadline. While the pay bump will vary based on each taxpayer’s total income and number of allowances, most taxpayers will see a modest increase. Investopedia estimates that a tax reduction of $1,000 would result in approximately $80 extra each month.
Changes to federal withholding will not impact payroll taxes like Social Security and Medicare, or any state or local taxes. Like other tax changes, the impact will vary based on income brackets, number of allowances, and other calculations.
Taxpayers will not have to make any adjustments to previously filed W-4 Forms. Employers will be able to apply the new withholding tables without the need to file new forms. However, once a new W-4 form is issued, taxpayers will have to fill one out.
For specific questions about tax changes, please consult a tax advisor.
Sources: Investopedia, IRS.gov, USA Today