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After new tax law, many workers finding more in paychecks

February 4, 2018 at 3:54 pm

By Mark A. Stevens
Chief Marketing Officer

Some taxpayers may have already noticed that your take-home pay is a little more than usual. That’s because a new tax law passed by Congress has been implemented, and many employers have already made the change even though it’s not required until later this month.

Just how much each person will see in their paycheck will differ from person to person and tax bracket to tax bracket.

Some companies have already started adhering to the new rules, but employers aren’t required to comply until Feb. 15. Either way, changes in the tax law will result in most workers taking home more of their paycheck, as less goes to the government.

To comply with the law, the Treasury Department released new withholding tables, which tell employers how much to withhold from their employees’ paychecks. According to USA Today, 90 percent of workers should see a decrease in withholding, resulting in more take-home pay when the new guidelines are implemented.

In his “The Motley Fool” column for USA Today, Matthew Frankel writes, “The U.S Treasury Department releases annual withholding tables for employers that provide a framework for how much they should withhold from their employees’ paychecks to cover federal income taxes. Without getting too technical, the withholding tables consider information such as your income, paycheck frequency, tax-filing status, and the number of allowances you claimed on your W-4 form. The tables use this information in conjunction with the current tax brackets to determine the appropriate amount of money to withhold from each paycheck for federal taxes.”

To read the column in full, please go to https://usat.ly/2DGkx64. The column provides details on how to calculate how much more you will take home.

The amount workers will see will vary. So to answer the question, “How much of a difference will it make to you?,” isn’t so easy. The short answer is: “It depends.”

One example the USA Today column used was for a single taxpayer earning $50,000 a year and paid biweekly. The column estimated that the taxpayer would end up with about $96 more per paycheck in their pocket.

But, an article from Money.CNN.com notes, “for many taxpayers, they will need to assess whether the new tables really are withholding enough money so that they’re not saddled with a big bill when they file their taxes next year. 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 will not issue new W-4 forms until 2019.

Categories: Uncategorized.

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