More employees underwithheld for 2018, says IRS: How Payroll can help Over one-fifth of workers may now owe taxes to IRS Underwithholding taxes from employees’ pay is a significant problem, and it’ll likely get worse going forward. According to a report from the U.S. Government Accountability Office (GAO), the percentage of Americans who aren’t withholding enough tax from their incomes is set to rise this year, due to changes caused by the Tax Cuts and Jobs Act. While the vast majority of taxpayers overwithhold taxes (and can plan to receive a refund from the IRS at tax time), an estimated 21% will withhold less than what they’ll owe for 2018. That’s based on a simulation the GAO ran after the Treasury Dept. updated the withholding tables for this year to account for tax reform. Impact of updates The percentage of workers who underwithheld will probably continue to rise, especially since form W-4 won’t be fully revised in light of the Tax Cuts and Jobs Act until 2020. Plus, although the Treasury just released updated withholding tables this year, it may make even more changes to the withholding process in 2019, since it’s authorized to do so under tax reform. To make the process more transparent, the GAO has asked the Treasury to create clear roles and responsibilities for updating the withholding tables, so employers will have a better idea of when they can expect new tables in the future. Solving tax problems Although the Tax Cuts and Jobs Act has been in place for months now and employees are being paid based on the adjusted tables, it’s likely many of them won’t learn if they’re underwithholding until early next year when they fill out their personal tax forms. Now’s the time for you to start preparing for questions from employees about why they owe taxes when they never have before. Be prepared to show them data like the updated tax brackets for 2018. You can head off some problems by reminding workers to perform a “paycheck checkup” using tools available on the IRS’ website. If they find any issue, let them know they can submit a new, updated Form W-4 to Payroll at any time to adjust their withholding. Cite: bit.ly/withhold563
More employees underwithheld for 2018, says IRS:
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