GOP tax reform and changes to your paycheck – By Brittany De Lea (foxbusiness.com) / Dec 19 2017
As the GOP took a step toward passing sweeping tax reform on Tuesday, which is expected to alter tax rates for millions of Americans, it may not be too long before some employees see those changes reflected in their paychecks.
“It’s expected that the Treasury Department will come out with withholding tables in January, [so] employees might see the effect in [their] paychecks in February,” Pete Isberg, vice president of government relations at payroll services firm ADP, told FOX Business. That is, of course, assuming the tax bill is signed into law before the beginning of the New Year.
President Donald Trump said Americans could expect bigger paychecks beginning in February, which may hold true for those who will both experience reduced rates under the new tax system and have taxes withheld from their weekly income. The IRS withholding tables will come out once the agency has reviewed the approved legislation in its entirety, which includes massive changes to the current infrastructure. Those changes will then be processed and integrated by payroll companies and employers.
Isberg, however, pointed out that it could take “longer for certain employers depending on their arrangements.” While employers who use a big payroll processing firm like ADP may have an easier time with the transition, employees at small businesses or other companies may have to wait a bit longer for the changes to be fully implemented, Isberg noted.
Not every payroll processor is as calm about the pending changes as ADP. The American Payroll Association (APA), which represents 21,000 members and 17,000 employers, wrote a letter to Congress in early December saying that its members were “already starting to panic” about having to implement “herculean” changes in such a short amount of time.
“Whatever version of this ‘tax reform’ measure is enacted will not make minimal changes to the tax system,” the letter read. “It will turn much of the system, especially the payroll withholding infrastructure that is the underpinning of our entire economy, upside down.”
One potential snag, cited by both Isberg and APA, is employee forms. All employees may need to submit entirely new W-4 forms in accordance with the revamped tax law, which eliminates exemptions, in order to request withholding taxable income. That task, realistically, cannot be accomplished at the very start of the year, Isberg said, so that is one area where his firm is working with the IRS on a potential compromise. There could also be some additional responsibilities placed on employees to make sure the data is collected quickly and accurately, he added.
Meanwhile, the APA letter asked Congress to provide “transition relief” for U.S. employers throughout the coming year.
ADP, which is responsible for one out of every six paychecks for U.S. workers, said that while the timing isn’t the most convenient, it would not be the first time changes are enacted just before the beginning of a New Year.
“We’ve been through this many, many times,” Isberg said.
http://www.foxbusiness.com/politics/2017/12/19/gop-tax-reform-and-changes-to-your-paycheck.html
PB/TK – I just can’t wait to watch Social Media come February 2018 for people comparing paychecks, good and bad. But how quickly do employers have to get those changes to their accountants to see the difference.
