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The New Tax Law: Payroll Withholding -- WSJ

14 Feb 2018 7:32 am

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 14, 2018).

More than 90% of workers will see bigger paychecks due to the tax overhaul, according to government estimates. The changes began to show up in early February.

But tax specialists warn that changes to paychecks may not reflect what a taxpayer will owe for tax year 2018, or the size of future tax refunds. So they are advising employees to fine-tune their withholding by filing a new W-4 form. Some who don't do so risk being underwithheld and subject to penalties, while others could receive smaller refunds than expected.

"Individual results are going to vary widely, and people can't assume that paycheck withholding equals their tax bill for 2018," says Mary Hevener, a payroll tax specialist and attorney at Morgan, Lewis & Bockius LLP.

Overall, about 80% of filers will see a tax cut for 2018 and about 5% will see a tax increase, with no change for the rest, according to the Tax Policy Center.

Treasury officials said the new withholding tables have been adjusted to reflect the larger standard deduction, new tax rates and repeal of the personal exemption. But these tables don't take into account other important tax changes such as the expanded child credit or the new limits on deductions for state and local taxes.

To adjust for their individual circumstances, taxpayers need to fill out a new W-4 withholding form. The IRS expects to post this form in February, along with a new withholding calculator.

In general, employees must pay in at least 90% of what they owe by year-end or risk an interest-based penalty on the underpayment.

--Laura Saunders

Write to laura.saunders@wsj.com
 

(END) Dow Jones Newswires

February 14, 2018 02:32 ET (07:32 GMT)

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