Taxpayers should start seeing the effects of tax changes in their take-home pay as soon as February 1 and no later than February 15, Treasury Secretary Steven Mnuchin said Thursday.
The announcement came as officials detailed guidelines concerning the implementation of the new tax rules, and it was met with criticism.
"We have already seen confusion about withholding changes, confusion about the deductibility of prepaid property taxes, and confusion about whether states can allow taxpayers to make charitable contributions in lieu of taxes as a way of permitting their residents to claim larger tax deductions than would otherwise be allowed because of the new $10,000 cap on the state and local tax deduction", National Taxpayer Advocate Nina Olson said.
In the meantime, on Thursday, a senior IRS official speaking on background during a phone call press conference explained that the new withholding table is the first installment in a three-step process created to ensure wage earners have the correct amount of taxes withheld, preventing under or over paying.
Democrats have been critical of a push by the Treasury Department and the I.R.S.to get companies to quickly adopt the new withholding tables and warned earlier this week that taxpayers could get hit with big tax bills if they withhold too little in anticipation of the lower rates.
The new law provides steep tax cuts for corporations and wealthy Americans while offering more modest reductions for most low- and middle-income families and individuals. Mnuchin said the White House press briefing that Treasury and the IRS will release new W-4 forms for 2019 later in the year.
One expert said the New Jersey and California plans have a fatal flaw.
But that will be partially offset by new curbs on numerous tax breaks, including the elimination of personal exemptions and the new cap on state and local taxes. Underwithholding would lead to taxpayers owing more when they file their 2018 returns next year.
Companies have been awaiting details from the IRS following the sweeping tax overhaul passed at the end of last month that changes tax rates and brackets, increases the standard deduction and repeals personal exemptions. A senior IRS official said he expected that level to fall just a bit next year to around 73 percent.
"Republicans are using brute force and speed to implement a law that will deliver a financial blow to hardworking Americans all across the country", Sen. We anticipate issuing the initial withholding guidance in January, and employers and payroll service providers will be encouraged to implement the changes in February. Ron Wyden (D-Ore.) said in response.