Once all the political commotion over tax reform settles, what most people care about is “Is my paycheck going up or down?” The problem is complicated by politicians promising a big tax cut on the television news and through social media channels while accountants warn that some people will likely pay more. The end result is likely to be some confusion and tension among employers and employees.
What we don’t know:
- If the tax bill will be passed into law (we presume it will)
- When the new law takes effect (we presume January 1, 2018 for payroll purposes)
- The details of the changes
- The IRS response in changing employer withholding law (the W4 handling process)
- The IRS response to estimated taxes for self-employed (we presume that amounts calculated under current law are sufficient to avoid penalty)
What we do know:
- Some people will pay less tax and other people will pay more.
- People with larger amounts on Schedule A are most at risk.
- We will have relatively short time to adjust payroll withholding or risk larger tax issues later.
- Accountants and online tools will be available to help with the adjustment.
I will be available to clients to discuss the issues and make appropriate adjustments to payroll systems and estimated payments.