If Republicans succeed in passing a tax overhaul by Christmas, the law could mean major changes for your take-home pay — not all of them welcome.
But those changes probably won’t be reflected in your paycheck in time for the New Year.
The American Payroll Association, whose members represent 17,000 employers, warned lawmakers Monday that they were creating a “herculean task” for companies and payroll service providers by leaving them such a short time to start implementing the new provisions, which would take effect on January 1, 2018.
“Our members are already starting to panic, on behalf of themselves and millions of employees, about the effect on 2018 withholdings of a tax bill that will be effective a week after its enactment,” the APA said in a letter.
Late-year tax changes by Congress have become something of a holiday tradition in the past decade of partisan gridlock. But this year is different.
That’s because the tax overhaul would make fundamental changes to gauging how much tax should be withheld from your paycheck so that you’re not left with a big tax bill when you file your federal return.
Both the tax bill passed by the House and the one passed by the Senate would double the standard deduction and eliminate personal exemptions. They also would change the income tax brackets and alter various family credits.
In addition, some of the once tax-free workplace benefits may become taxable wages.
And there may be changes to how much federal tax is automatically withheld on any bonus, commission or other “supplemental wages.” They’ve been taxed at 25% since 2007, but that rate may go up to 28% under a new tax law, the APA said.