new federal tax plan is now in effect — and it’s
going to mean more spending money for most people, at
least in the short term.
workers across the country will have less tax money
withheld from their pay, now that the Internal Revenue
Service has released new withholding tables and
instructed employers to make adjustments.
much will paychecks change?
exact amount will vary depending on an individual’s
earnings, frequency of pay, and whether deductions are
claimed. U.S. Treasury Secretary Steven T. Mnuchin said
90 percent of workers will see an increase in their
paychecks. The Tax Policy Center, meanwhile, said 80
percent of taxpayers will receive an overall tax cut in
the 2018 tax year.
single person who earns $50,000 a year, has no children,
claims no deductions, and is paid biweekly could receive
as much as $61 more per paycheck under the new tax
married couple with two children under 17 and a
household income of $75,000 would receive an overall tax
break of $2,119 in 2018, according to a Tax Policy
Center analysis. A married couple with two children an
income of $30,000, meanwhile, would receive a tax break
of $817 — or roughly the same percentage.
will these changes appear in paychecks?
IRS guidelines, published last month, instructed
employers to implement changes by Feb. 15.
payroll departments, making changes quickly — during
weeks when they are also sending out W-2 forms to
employees for their 2017 taxes — is a challenge, said
Alice Jacobsohn, senior manager of government relations
for the American Payroll Association.
that use software services or vendors for payrolls will
need to ensure those third parties make adjustments, and
then test the changes themselves, Jacobsohn said.
can’t just enter the numbers in and say ‘done,’"
she said. "They hopefully will be able to meet that
Feb. 15 deadline or be pretty close to it. But as you
trickle down to smaller employers, it may be more
difficult for them."
everyone get a tax break?
if take-home pay goes up, not everyone will get a tax
cut. Lawmakers in high-tax states have said they are
concerned about constituents who relied on large
deductions of state and local income taxes, because that
deduction is now capped at $10,000. New Jersey, with its
highest-in-the-nation property taxes, is scrambling to
soften that blow, through potential changes to the state
tax system and a plan to join other states in suing the
cuts also vary based on how much people earn. "In
general, higher-income households receive larger average
tax cuts as a percentage of after-tax income, with the
largest cuts as a share of income going to taxpayers in
the 95th to 99th percentiles of the income
distribution," a Tax Policy Center analysis found.
taxpayers still get refund checks after filing taxes?
the process of changing withholding tables, IRS
officials said they aimed to limit over- and
under-withholding. That means tax refunds will likely
shrink for many taxpayers, said David L. Zalles, a Blue
Bell tax accountant.
average refund for individuals was $2,795 in fiscal year
2016, according to IRS data.
someone had grown accustomed to large refund checks to
pay off debt or fund a vacation, Zalles said, this year’s
changes may lead to an unpleasant surprise next year.
may be happy with (increased take-home pay), and won’t
be unhappy until they find out that they are not going
to get their big refund next year," Zalles said.
these changes impact the economy?
Independent Fiscal Office predicts that extra money for
residents will mean a boost for the state economy.
more cash in their pockets, consumers are likely to
spend more. That spending, in turn, raises more sales
tax for the state, said Matthew Knittel, director of the
Independent Fiscal Office in Harrisburg. Companies have
also received tax cuts, leading to increases in
dividends and capital gains, he said.
are expecting a short-term boost of economic growth in
the next year or two," Knittel said. "Long
term, it’s less clear whether it will boost economic
growth, and one of the concerns is that the higher
federal debt will drive up interest rates."
income in Pennsylvania could increase by at least $7
billion in the fiscal year that begins in July, Knittel’s
office said, citing other reports. Sales tax revenue
could increase by between $10 million and $20 million in
the current fiscal year, according to the Independent
Fiscal Office, and by between $60 million and $80
million in fiscal year 2018-2019.
more changes coming?
payroll changes going into effect this month may not be
the last change of the year. IRS officials said they are
revising the W-4 form, which employees fill out to claim
deductions and give employers guidance on how much to
withhold from their pay.
of the American Payroll Association, said a big change
to the form could require new computer software for
employees. That could take months to implement she said.
you filled out a W-4 20 years ago and maybe you didn’t
change it because your situation hasn’t changed …
explaining to that employee to get them to understand
that they have to fill out a W-4 and what they need to
do, that kind of outreach takes time as well," she
said. "It’s really just a timing issue of getting
it all done within the deadlines."