Will New Tax Law Merely Create A “Phantom Windfall”
Since taxpayers will have to wait until 2019 to fully understand the effects of the new tax bill, there seems to be viable reason for concern.
In fact, according to a recent article in AccountingToday.com, “The ranking Democrats on the tax-writing House Ways and Means Committee and Senate Finance Committee are worried the Internal Revenue Service might succumb to political pressure by releasing withholding tables this year that cause employers to withhold too little in federal taxes from their employees’ paychecks to make it appear the tax cuts are larger than they really are, with the result that taxpayers will end up owing more money on their taxes next year.”
Senate Finance Committee ranking member Ron Wyden, D-Ore., and House Ways and Means Committee ranking member Richard Neal, D-Mass., have expressed their concern over this in a letter they sent to Honorable Gene L. Dodaro, the Comptroller General of The United States. They expressed specific concern over acting IRS Commissioner and Assistant Secretary for Tax Policy David Kautter’s “ status as both acting IRS commissioner and Assistant Treasury Secretary for Tax Policy, who helped develop the new tax law.”
With the repeal of the personal and dependent exemptions as well as most itemized deductions, taxpayers will clearly face a very different tax code when filing their 2018 taxes.
There exists the possibility that “The Office of Tax Policy at the Department of Treasury may push IRS to incorporate withholding formulas that take insufficient taxes out of workers’ paychecks.” If that happens, “This will foster the appearance of a larger tax cut in 2018 that then disappears during the 2019 filing season when these same working families file their taxes and discover to their chagrin that they have been underwithheld and have to pay back the previous year’s phantom windfall.”
We can only hope that the withholding tables are accurate and will not leave Americans with a huge tax bill next year.