VERIFY – YOU’VE GOT QUESTIONS, WE’LL FIND ANSWERS
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As Republicans push to pass a massive plan to overhaul the tax code, President Donald Trump made a tangible promise: more money in your pocket and soon.
Assuming the bill passes before Christmas, the president claimed "the IRS has confirmed that Americans will see lower taxes and bigger paychecks beginning in February."
The final version of the plan does, in fact, reduce tax rates across all seven tax brackets. But the Verify team found that doesn’t mean all Americans are getting a tax cut.
WHAT WE FOUND
Trump was correct about when people should expect to see their checks change, but he oversimplified claim about taxes.
Here’s the IRS’ statement from the same day as Trump’s announcement:
“The IRS is continuing to closely monitor the pending legislation in Congress, and we are taking the initial steps to prepare guidance on withholding for 2018. We anticipate issuing the initial withholding guidance (Notice 1036) in January reflecting the new legislation, which would allow taxpayers to begin seeing the benefits of the change as early as February. The IRS will be working closely with the nation's payroll and tax professional community during this process.”
Most American workers need to withhold money from each paycheck to pay their taxes. Some get refunds after the year is over; others have to pay more.
The IRS hasn’t set new rules for withholding yet because the bill is not yet law, (though it appears to have the votes to pass.)
Still, accounting experts tell 9NEWS that most American workers should expect to see less money withheld by the IRS under the new system if it does become law.
However, that doesn’t mean that taxes will go down for everybody.
“It isn’t always necessarily dependent on rate,” accountant Mira Fine said. “Especially with the elimination of certain exemptions, which potentially could be more than the standard deduction.”
The non-partisan Tax Policy Center (often cited by members of both parties) predicted that 80 percent of Americans would be in for tax cut in the first year.
But each taxpayer's case will vary depending on circumstances. The bill eliminates a series of deductions that will end up causing bigger tax bills for some folks.
In these cases, taxpayers could end up owing even more because their withholding decreased while their tax bill increased.
Fine recommended Coloradans – especially those who currently itemize -- consult a tax professional after the IRS releases its new tables in January and re-evaluate their withholdings. The caveat being that Congress passes a tax reform bill before the end of the year.