IRS releases new withholding tables

GOP promises workers will see increases in their paychecks starting in February.

The Internal Revenue Service released guidance for employers about how much tax they should withhold from workers’ paychecks in 2018 — and said it would soon offer an online calculator that employees can use to make sure the amounts are correct.

Companies have been awaiting details from the IRS following the sweeping tax overhaul passed at the end of last month that changes tax rates and brackets, increases the standard deduction and repeals personal exemptions. Employers should begin using the new withholding tables as soon as possible, but not later than Feb. 15, according to the IRS notice issued Thursday.

Republicans have promised that American wage earners will see bumps in their paychecks starting in February — after employers have made the withholding adjustments. House Majority Leader Kevin McCarthy of California has said taxpayers should “check their check.”

The IRS will release an online calculator by the end of February so taxpayers can ensure their paychecks are accurate, Treasury Secretary Steven Mnuchin said during a White House press briefing Thursday. Taxpayers who have more complicated tax situations, such as those who itemize deductions, are especially encouraged to check their withholding amounts, the IRS said.

Mr. Mnuchin added that about 76% of taxpayers typically see withholding amounts that result in refunds at the end of the year, and he doesn’t expect that percentage to change under the new tables.

“This is outstanding for families in Texas and taxpayers across the country,” House Ways and Means Chairman Kevin Brady, a Texas Republican, said in a statement. Nine out of 10 taxpayers “will see a boost in their take-home pay within the coming weeks,” he said.

(More: Tax law’s pass-through provision could harm 401(k) plans)

Two congressional Democrats have expressed concern that the new tables would “systematically underwithhold income taxes during the 2018 tax year.” That sort of move would boost workers’ pay before the November 2018 congressional elections but could leave them “owing federal income tax when they file in 2019,” according to a Jan. 8 letter to the Treasury Department from Sen. Ron Wyden of Oregon and Rep. Richard Neal of Massachusetts.

Mr. Mnuchin pushed back on those concerns Thursday, saying the IRS usually issues its withholding tables every January, and the agency decided to wait until February to take into account the changes under the new tax system.

“Any claims that we are doing this for political issues are ridiculous,” Mr. Mnuchin said.