New tax law won't affect 2017 filing season

Treasury 90% of wage earners will likely see higher take-home pay

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Individual taxpayers aren't required to make any changes to their Form W-4 right now.

But Democrats have alleged the number could fall much more, accusing the White House of changing the tax tables in a way that will lead to Americans dramatically under-withholding their tax payments during the year, only to be hit with big tax bills next year.

But these tax withholding decisions are based on tax forms Americans file with their employers, known as W-4s, that were written to apply to an outdated tax system.

"The time it will take for employees to see the changes in their paychecks will vary depending on how quickly the new tables are implemented by their employers and how often they are paid - generally weekly, biweekly or monthly", the IRS writes online.

Treasury Secretary Steven Mnuchin said Friday it isn't clear whether Congress will need to take up a bill to make technical corrections to the sweeping new tax law that took effect this month.

The amount of one withholding allowance on an annual basis increased to $4,150 in 2018 from $4,050 in 2017, the IRS said.

Treasury also said that employers should withhold 22 percent for taxes on bonuses - lower than the current rate of 25 percent. "We'll work with payroll providers; we'll work with companies, we'll do education sessions, so that taxpayers are properly withheld". Treasury would achieve that, the lawmakers surmised in the letter, by pushing the IRS to change its formula for withholdings.

Most people fill out their W-4 form when they're hired at a new job and don't change it unless they get married, have kids, get divorced or experience other life-changing situations. Ron Wyden, the top Democrat on the Senate Finance Committee, said in a statement.

The Treasury Department could be under "substantial pressure" to guarantee tax cuts to households by withholding too little from paychecks, Sen. Businesses are rewarding their employees, expanding their operations and making new investments as a direct result of the Tax Cuts and Jobs Act. Ron Wyden (D-Ore.) and Rep. Richard E. Neal (D-Mass.) said in a January 8 letter to U.S. Comptroller General Gene L. Dodaro.

They are asking the Government Accountability Office to review the revised withholding tables and determine whether they protect millions of taxpayers from being surprised during the 2019 filing season.

The GAO has said Wyden's request must go through its usual review process before a decision to proceed is made.

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