Published: Fri, January 12, 2018
World News | By Laverne Osborne

IRS Underfunded in Wake of Tax Overhaul, Agency Advocate Says

IRS Underfunded in Wake of Tax Overhaul, Agency Advocate Says

Senator Ron Wyden of OR and Representative Richard E. Neal of MA, the top Democrats on the Senate and House tax writing committees, sent a letter to the Government Accountability Office asking it to analyze the 2018 withholding tables and determine whether they will result in "systematic under-withholding".

The new system ushered in by the tax reform law will be ready for 2019, but the immediate guidelines are created to allow wage earners to get immediate benefits this year without snags.

By the end of February, the IRS will unveil a calculator to determine accurate withholding amounts on its website.

President Donald Trump and the Republican architects of the tax plan have deflected criticism of the unpopular legislation, insisting at every turn that Americans will come to love the new law when they see their heftier paychecks next month - with less money withheld in anticipation of lower income taxes.

Mnuchin spoke shortly after Treasury and the IRS issued an update to the IRS formula that employers use to estimate employees' tax bills. We anticipate issuing the initial withholding guidance in January, and employers and payroll service providers will be encouraged to implement the changes in February. Those changes, the senior IRS official said, will require most, but not all employees, to file new W4 forms later this year.

Yahoo Finance ran the numbers and found a net drop in tax withheld in each of 11 income categories we examined.

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"These new tables will help deliver the tax cuts as soon as possible to as many Americans as possible, with as little disruption as possible", Mnuchin said at the White House press briefing. Currently, however, the IRS has instructed employers to continue using the old, 2017 withholding tables.

"As the National Taxpayer Advocate, I see daily the consequences of reduced funding of the IRS and the choices made by the agency in the face of these funding constraints", Olson wrote in the preface to the report. Among the new recommendations, Olson is recommending Congress codify both the Taxpayer Bill of Rights and the IRS mission statement as Section 1 of the Internal Revenue Code.

While companies and workers try to figure out the new tax landscape, states are trying to mitigate some of the tax hits in the law.

For people with simpler tax situations, the new tables are created to produce the correct amount of tax withholding.

The near-doubling of the standard deduction, along with the increase in the phase-out and the refundability of the child tax credit will go a long way in making up for the loss of personal exemptions for most taxpayers.

Although the new calculator will be most helpful to taxpayers with complicated taxes, he urged everyone to use it. Top Democrats on the congressional tax-writing committees have asked the independent Government Accountability Office to also review the IRS tables to ensure that problem doesn't happen.

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