Don’t Get Caught With Too Little Taxes Withheld
Everyone, from the IRS to huge payroll companies and owners of small businesses, has been scrambling to get the new tables for withholding taxes enacted.
The IRS released the tables recently “amid warnings that the tables may not be accurate and will need further refinements.”
While the 2017 tax season will not be affected by the changes, since the newly published tables “may not be accurate,” you may want to double and triple check to make sure your employer is deducting enough withholding tax so you won’t be surprised and owe Uncle Sam in 2019.
Unfortunately, at the moment there is no surefire way of knowing if you’re having enough withholding taken out or not.
Not even your employer will know. You won’t know in February or March either, when you first begin to see the effects of the new tax bill reflected in your paycheck.
Word is that some Democrats on the House Ways and Means and Senate Finance Committees are worried that “the Internal Revenue Service might succumb to political pressure by releasing withholding tables this year that cause employers to withhold too little in federal taxes from their employees’ paychecks to make it appear the tax cuts are larger than they really are, with the result that taxpayers will end up owing more money on their taxes next year.”
That would be a very unfortunate scenario for millions of taxpayers. It represents a major concern for some in Washington.
In a letter to the Comptroller General of the United States, Ron Wyden and Richard E. Neal have expressed their concerns and are asking for a Government Accountability Office (GAO) review. In the letter they write, “Given that the IRS does not have an independent, nonpolitical commissioner, we are concerned that the Department of Treasury, which oversees the formulation of these tables, may unduly influence the new withholding tables for the 2018 tax year in a manner that will result in millions of taxpayers receiving larger after-tax paychecks this election year but ultimately owing federal income tax when they file in 2019.” Additionally the two expressed their opposition to, “any attempts by the Administration to systematically underwithhold income taxes during the 2018 tax year, knowing that in 2019 taxpayers may find they owe taxes when they were expecting a refund.”
Without personal exemptions, which have been repealed, and without the ability to itemize and receive deductions on mortgage interest, whether the majority of Americans will end up with a tax savings or a tax bill still remains to be seen.
Let’s see if the Comptroller General of The United States will take Wyden and Neal’s concerns seriously and put the withholding formulas to a GAO review. The two gentlemen are clear in what they are attempting to prevent from happening when they write, “We do not want the Administration to exacerbate their tax liabilities with tax tables that intentionally withhold too little federal income taxes. We recognize that Treasury will be under substantial pressure to make good on the promise by the President and various Administration officials that the new tax law will provide households with a $4,000 tax cut. The Office of Tax Policy at the Department of Treasury may push IRS to incorporate withholding formulas that take insufficient taxes out of workers’ paychecks. This will foster the appearance of a larger tax cut in 2018 that then disappears during the 2019 filing season when these same working families file their taxes and discover to their chagrin that they have been underwithheld and have to pay back the previous year’s phantom windfall.”
If you need help with your 2017 taxes, give us a call. And, if you haven’t filed your taxes in a few years, definitely give us a call. You could be eligible for additional tax relief. That is, if you were victims of Hurricanes Harvey, Irma or Maria may be able to deduct greater portions of hurricane disaster losses that occurred in Florida, Georgia, Texas, Puerto Rico or the U.S. Virgin Islands because part of the usual casualty loss limit does not apply, In addition, many victims can choose to claim hurricane disaster losses sooner by reporting them on their 2016 federal tax return if they have not yet filed or by amending their 2016 tax return if they already filed it in 2017.