Getting Smart with Money: The Withholding Issue

Whether you are an employer or employee, payroll is changing in light of the new tax law. I found a few articles and resources that you might find useful in understanding these changes and how they might affect your income tax withholding.

Trump Administration Opts for Speed Over Accuracy in Implementing New Tax Law
The Trump administration is pushing hard for employees to see an increase in their take-home pay as soon as possible. Expect confusion (and errors) while the details of this plan are being worked out and implemented. Remember who is responsible for the administration and oversight of these changes: the IRS, an agency hardly known for its agility and forward-thinking that is further crippled by serious underfunding and insufficient staffing. 

New Tax Withholding Tables Are Issued
At least they’re trying to be helpful: the IRS has taken the first step in guiding employers to adjust withholdings before doing a full roll-out and creating/requiring new W-4s. New income tax withholding tables have been issued and employers are encouraged to implement these new tables no later than February 15, 2018. 

IRS Withholding Tables Frequently Asked Questions
The IRS has created a page to explain the new withholding changes, which spells out employer and employee responsibilities, as well as the possible consequences for taxpayers (including being severely under-withheld or over-withheld, which may not be apparent until 2019). The new withholding tables are the first in a series of anticipated changes to emerge as a result of the new tax law. 

The moral of the story? Payroll tax withholding calculations are complicated, and employees are ultimately responsible for ensuring their withholdings are sufficient for their own tax burden.  

Employees:  It is not your employer’s job to know the nuances of your individual tax situation. Having more take-home pay in February may mean you’ll owe taxes on April 15, 2019.  

Employers:  Communicate these changes with your employees so they are made aware. If you don’t have a payroll processing service, now might be a good time to consider outsourcing this responsibility. A good payroll service is worth its weight in gold; they can assist with these current and upcoming changes so you can avoid any headaches and costly mistakes and instead focus on running your business.