Implementation of new tax reform: Payroll withholding tax may change, will it really save tax?

Implementation of new tax reform: Payroll withholding tax may change, will it really save taxes? [Overseas Chinese News reporter Shang Ying reported in Irvine on January 4] At the beginning of the new year, President Trump last Christmas...

[Overseas Chinese News reporter Shang Ying reported in Irvine on January 4] At the beginning of the new year, the new tax reform bill signed by President Trump before Christmas last year came into effect. Many office workers expect that the first payslip of 2018 will fulfill the tax reduction promise of the new tax law. Some people have learned that the tax deduction part of the payslip may be reduced.

Will reducing withholding tax on salary income really save taxes?

Irvine Accountant Chen said that federal income tax requires employees to pay taxes when they receive wages, so employers will withhold a certain amount of income tax when paying employees wages, and this part of the withholding tax will be paid directly to the IRS in the name of the employee. During the tax filing period at the end of the year, the IRS will calculate the final actual amount of tax paid based on each person’s actual situation and refund any excess tax.

Accountant Chen said that Trump’s new tax law is said to be a tax cut for every taxpayer, so after the new tax law comes into effect, the withholding tax on the salary slips of office workers may change. If prepaid tax of $200 was withheld for every $1,000 of salary income during the old tax law period, according to the calculation rules of the new tax law, the prepaid income tax portion of the payroll may be reduced to less than $200.

Accountant Chen pointed out that this does not mean that your income tax will definitely be reduced. The new tax law is very complex, and the situation of each person and each family is different. Whether the income tax will be reduced or increased depends on the actual amount of tax payable calculated by the Internal Revenue Service based on different tax rate rules after filing the tax at the end of the year.

Latest updated information notice from the U.S. Internal Revenue Service (IRS) website: Due to changes in the new tax law bill signed before Christmas 2017, the current IRS calculation rules for wage income withholding tax need to be updated. Preliminary income tax withholding guidance information will be released in January, and withholding tax rules will be announced as soon as possible once the withholding tax rules are updated. Therefore, the IRS encourages employers and payroll services industries to begin implementing adjustments to income tax withholding amounts in February.

Prior to this, employers and the payroll service industry will temporarily continue to use the old wage income tax withholding rule table system in 2017.

(Editor: Zoums)