Wednesday, January 10, 2018

New GOP Tax Withholding Could Leave Taxpayer's Owing Money for 2018

Behind the scenes a battle is going on where Republicans are pressuring the IRS to withhold as little as possible from taxpayers' pay checks to fulfill the claims that the tax cut benefits more than the very wealthy.  The problem is that such a move would leave many taxpayers finding out a year from now that either (i) they will get little or no refund, or (ii) they owe money, with many not having the funds to pay the taxes due.  Of course, all Republicans care about is giving a false picture until the 2018 midterms have passed and then it will be a case of "tough sh*t" for those who find themselves owing money a year from now.  A piece in Politico looks at the subterfuge being pushed by Republicans.  Here are highlights:
The IRS is facing its first big challenge implementing the new tax law: deciding how much in taxes to withhold from millions of Americans’ paychecks.
The agency is under pressure to take as little as possible so people will see big increases in their take-home pay ahead of this year’s midterm elections.
But that would come at a cost: smaller or even nonexistent refunds next year, though millions rely on them to plug holes in their family budgets. Democrats are already accusing the Trump administration of plotting "phantom windfalls" ahead of the November contest that will come back to haunt taxpayers next tax season.
“We oppose any attempts by the administration to systematically under-withhold income taxes during the 2018 tax year, knowing that in 2019 taxpayers may find they owe taxes when they were expecting a refund,” Sen. Ron Wyden and Rep. Richard Neal, the top Democrats on congressional tax committees, wrote to acting IRS Commissioner David Kautter.
“You’re going to start seeing a lot more money in your paycheck,” Trump said Monday during a speech to the American Farm Bureau Federation. The IRS did not respond to a request for comment.
There is a history of politicians trying to manipulate withholding, through obscure tables issued by the IRS, with an eye toward providing a short-term boost to the economy. President George H.W. Bush tried it ahead of the 1992 election, and the 1986 tax overhaul attempted, unsuccessfully, to quash refunds altogether.
Most of the new tax law took effect Jan. 1 because Republicans want it to boost growth before voters head to the polls this fall.
As Wyden and Neal pointed out, bigger paychecks now could mean a nasty surprise in 2019. Some accustomed to receiving annual refunds could potentially find themselves suddenly in arrears to the IRS.
“This is not something you want to fool the American taxpayer about — you don’t want to have them feeling good because they’re getting a big bump in take-home pay only to be surprised next year,” said Larry Gibbs, a former IRS commissioner.
“People ought to be able to understand what is being withheld from their paycheck and what that means — not just in terms of a bump in take-home pay, but also whether they’re still going to get a refund,” he said.
Taxpayers have long prized their tax refunds. The share receiving money back from the IRS at tax time has been firmly lodged at 70 percent or more since the 1960s, despite complaints from experts that it amounts to giving the government an interest-free loan.

So what should taxpayers do who receive larger paychecks?  Probably start setting much of it aside to make sure they don't find themselves in a huge mess come April 15, 2019.   Interest and penalties can quickly run up one's bill to the IRS.   As for Republicans, this effort is part of their campaign of lies and deceit, something that is the norm in today's Republican Party. 

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