Good news workers. You have one less thing to worry about in 2018 in connection with the impending new tax laws.
The Internal Revenue Service says that even though many revamped individual tax laws kick in on New Year's Day, there's no need to re-do your current W-4.
This tax document, pictured above in case it's been a while since you made any payroll withholding changes to your paycheck, is what your boss used to calculate how much in taxes to take out of your pay.
There had been some concern, primarily from payroll administrators, that the coming tax law changes would prove chaotic when it comes to transferring current withholding to the new tax rates and income brackets.
Key among the worries was how companies or the payroll firms they hire to handle this workplace task could get new W-4 forms from every worker and then input that data expeditiously.
Not to worry, says Uncle Sam's tax collector.
Still working on tax transitioning: The IRS says it is working on guidance to implement the tax law's new provisions and expects to release initial advice in January 2018 that employers and payroll companies should be able to put in place the following month.
Better still, the IRS says — or in its words, "emphasizes" — that the agency's coming payroll withholding information "will be designed to work with the existing Forms W-4 that employees have already filed, and no further action by taxpayers is needed at this time."
"Use of the new 2018 withholding guidelines will allow taxpayers to begin seeing the changes in their paychecks as early as February," says the IRS. "In the meantime, employers and payroll service providers should continue to use the existing 2017 withholding tables and systems."
When to adjusting withholding: Of course, you did notice the IRS' use of the phrase "at this time," didn't you?
It and all taxpayers know that taxes and our personal circumstances that affect them are always changing. That definitely will be true as the IRS, tax professionals and we taxpayers sort through the intricacies of the Tax Cuts and Jobs Act's many provisions.
The key one for most of us regular Jack and Jill Taxpayers is the change to our tax rates and how much of our money falls into each of the seven new tax brackets.
Once we get an idea of how that changes our pay, it will be wise to revisit Form W-4.
The goal here, under any tax law, is to have your withholding to be as close to your actual tax liability as possible. That way you don't have to worry about owing a lot or waiting for a big refund.
And remember, you might be waiting a while.
The law that requires the IRS hold certain refunds — those from returns that claim the EITC or presumable, in the case of the new law, the refundable portion of the enhanced child tax credit — until at least mid-February is still in effect.
But by adjusting your withholding, instead of waiting for the U.S. Treasury to send you your tax cash in 2019, you'll have the added tax cut money in hand each paycheck.
What to do with the money: The Republicans who pushed this bill through so quickly at the end of this year definitely want you to see that cash before you go to the mid-term election polls next November.
My apolitical position here is that you can use it to pay off high-interest credit cards throughout the year or splurge on a family dinner out once a month or so.
If, however, you're afraid you'll just blow any added income, consider upping your workplace 401(k) contribution so that the money will help grow your retirement fund. Or set up an automatic deposit at your bank or credit union so that each payday the added income goes directly into an emergency savings account.
Regardless of how you plan to handle possible added earnings, don't worry about the administrative side of that right now.
Just sit back, enjoy your holidays and share an extra toast on New Year's Eve that all you have to do to hopefully see more money in your 2018 paychecks is just be patient for a few weeks.
You also might find these items of interest:
- Most people pay more payroll tax than income taxes
- Got a refund? Paid a big tax bill? Time to adjust withholding!
- Social Security Administration lowers 2018 taxable wage base